Finance skills checklists

Finance Skills Checklists

The ability to understand finance is crucial to any manger who wants to advance their career. Our finance skills checklists will help you to understand financial reports so that you can make informed, intelligent decisions.

Key Financial Ratios Checklist

This Key Financial Ratios checklist details the key financial ratios you can use to help you interpret financial information.
The ability to evaluate the financial position of another organization is a valuable skill for any manager to have, whether you are choosing a supplier, considering a strategic partnership, or trying to work out how much credit to extend to a customer. They can also give you a valuable insight how well an organization is managed at the highest level. Many organizations can appear successful despite deep structural problems with the way they are financed and managed.
Whilst you can compare the ratios of organizations in different industries is usually of limited value because of differences in market conditions, capital requirements and competition. The trend over time is often more revealing than one figure in isolation and that comparisons between industries may not be very useful. You must have a clear understanding of what the organization actually does and the industry it operates in before you draw any conclusions from these ratios.
To use key financial ratios you must have access to the four main financial statements of the organization you wish to assess. These are: the income statementbalance sheetcash flow statement and the statement of retained earnings. You will also need to define an appropriate benchmark so that your financial ratios can be informative. This usually means comparing current performance to past performance or comparing performance to that of another organization.
There are several different key financial ratios that can be classified by the characteristic they measure: for example, solvency, profitability, performance, and investment history.

Download "Key Financial Ratios Checklist.pdf"

Financial Ratio Formulas Checklist

This Financial Ratio Formulas checklist provides you with a list of the most popular financial ratios used to assess an organization's performance, solvency, profitability and investment potential. It includes general notes on how to make valid comparisons and which financial statements you will need to make these calculations.
Financial ratios are used in two ways: for internal analysis of items in a balance sheet and for comparative analysis of an organization's ratios at different time periods and in comparison to others in the same sector. These ratios can be divided into three groups:
Solvency ratios are used to measure the ability of an organization to meet its long-term debts. It is common practice to calculate both the current ratio and quick ratio. This is so that you are aware of the extent to which stock held influences its current assets. These calculations will quickly show you if the level of stock an organization holds is too great and also whether it matches your expectations of the industry. You must always be careful when drawing conclusions from these ratios. It is quite possible that an organization may appear to be desperately short of working capital, but if it sells goods for cash and purchases with a long credit line, then it may be that it is being very well managed.
Recommended by Profitability ratios measure an organization's ability to generate earnings relative to sales, assets and equity and in doing so, highlight how effectively the profitability of a company is being managed. They are derived from the income statement and balance sheet information and divide an income or margin figure by the total revenue or total equity. Many people consider profitability ratios to be the most important overall and it is useful to compare the results with a return that can be obtained outside of the organization - for example, a low-risk investment in government bonds. The organization's return on assets can be improved either by increasing profitability or decreasing the capital employed.

Performance ratios measure how efficiently an organization uses and controls its assets as well as how effectively it is collecting money from customers etc. Typical performance ratios include: gearing, number of days credit granted, number of days credit taken, stock turnover, and overheads as a percentage of turnover. Gearing compares the finance provided by lenders with the finance invested by shareholders.
Number of days credit granted is used to measure the effectiveness of an organization's debt collection. Number of days credit taken sets out the number of days the organization takes to pay its suppliers. Stock turnover shows how quickly the organization turns over stock into sales.

Download "Financial Ratio Formulas Checklist.pdf"

Accounting Terminology Checklist

This Accounting Terminology checklist outlines the terms, concepts and conventions that are accepted within the accounting profession.
This checklist is designed to provide 'non-financial' managers with precise definitions of accounting terms. Even though you may be familiar with some of them, it is important to know their exact meanings. For example, you may hear the terms 'revenues' and 'receipts' used interchangeably in casual office conversation. However, as far as business accounting is concerned they are different things and you will find yourself becoming confused if you don't appreciate the difference.
Even if you don't have much day-to-day involvement with financial people it is still a good idea to have an understanding of how management and financial accounts are produced and the differences between them. At the very least you should make sure that you know the basic concepts and terminology needed to understand income statementsbalance sheets, and statements of cash flow as these are widely used, even by nonprofit organizations.
You should also take the time to understand exactly how and when transactions are shown in accounts and how things like stock is valued and assets depreciated over time. These things are to some extent counter-intuitive and you could find yourself misunderstanding something important if you don't know exactly how they are treated in financial reports.
A working knowledge of accounting terminology and principles becomes more important the higher you go in any organization. Even if you work in the non-profit sector it is worth taking the time to develop this knowledge, especially if you have ambitions to move up to a senior role.

Download "Accounting Terminology Checklist.pdf"

Financial Liabilities Checklist

This Financial Liabilities checklist enables you to quickly identify whether you are dealing with a liability or not when handling management finances. It also aids your ability to understand this aspect of an organization's balance sheet.
This checklist enables you to quickly identify whether you are dealing with a liability or not when handling management finances. It also aids your ability to understand this aspect of an organization's balance sheet.
An organization's liabilities are its legal obligations or debts that occur as a result of operating the business or service organization. It includes the following items:

Accounts Payable
Deferred revenues
Accrued expenses

The balance sheet lists liabilities of an organization under two headings:

Current Liabilities
Long-term Liabilities
These two forms of liabilities plus the equity within the organization will balance with its assets; the credit side of this financial statement.
Current Liabilities
These are items that are due or must be paid within a year.
This includes payable items such as employees' wages, accounts, accounts payable, taxes, and unearned revenue when adjusting entries. It also includes the portion of any long-term bonds that need to be paid in the current year, as well as short-term obligations such as the purchase of equipment.

Download "Financial Liabilities Checklist.pdf"


This checklist is designed to help you create a budget quickly and efficiently that enables you to achieve your financial target. It gives a broad based six-step process you need to work through to come up with a budget figure that is acceptable to the needs of your department or team and meets the financial target you have been given.
Being able to use a spreadsheet is essential management skill that makes the task of manipulating the figures that make up your budget easy and quick. This allows you the flexibility to create several versions of how you could allocate your budget between different cost centers or budget holders. One of its most useful functions is the opportunity to assess what impact on expenditure and performance a reduction in your overall budget would have and importantly your ability to attain the set target.
Many managers are responsible for managing a variety of devolved budgets and this adds additional steps to the process above. This template can be used for devolved budget creation by altering the name of additional sheet current referred to as ‘Version 1, Version 2 & Version 3’ to ‘Budget Name Unit 1, Budget Name Unit 2 & Budget Name Unit 3’. If you require further spreadsheets it is easy to add them to this template with one click.
Being responsible for several budgets requires you to be meticulous in your budget management and different templates for creating, monitoring and forecasting will be invaluable tools. They also provide you with the ideal tool to ask your unit budget holders to use in when they are sending their forecasts and expenditure reports back to you. The diagram below shows a typical process of how an overall budget is allocated out to lower level business units and their respective budget holders.



This checklist has been designed to help you understand whether or not the budget you have taken over with a promotion or new role is in a healthy state. Knowing the state of the budget you have inherited has to be one of the highest priorities you set yourself when you accept a new role. If you don’t understand and quickly become familiar with the role’s finances you will have significant problems giving the best first impression to your superiors.
It is a task that can’t be put off long - a week at the most. If you delay any longer you are exposing yourself to some nasty surprises – suppliers not being paid, delays in purchase of resources, overtime payments missed etc. Such events will seriously damage your authority and provide a poor impression to all you come into contact with.
The sooner you are on top of all budgeting issues the quicker you will be able to feedback to your manager any concerns you have found and suggested ways to overcome them. It is important to let him or her know if targets are seriously compromised as a result of your findings.
It is wise to assume anyone leaving an organization will not have been as diligent in their tasks whilst working their notice as their focus is on the new opportunity. In my experience ‘bad’ news is ignored in such situations and left for the successor to both identify and sort out.