Financial Basics — Job Aid

Assets = Liabilities + Equity.

Assets. Resources owned by a business that provide future economic benefit.

Current Assets. Assets expected to be converted to cash within one year.

Accounts Receivable (A/R). Money owed to the business by customers.

Fixed Assets. Long-term assets used in operations.

Liabilities. Obligations owed to others that must be paid in the future.

Current Liabilities. Obligations due within one year.

Accounts Payable (A/P). Money the business owes vendors and suppliers.

Debt. Borrowed funds that must be repaid.

Owners' Equity. The owner's claim on the business.

Revenue − Expenses = Net Income.

Revenue. Income earned from providing goods or services.

Cost of Goods Sold (COGS). Direct costs of producing goods or delivering services.

Gross Profit. Revenue remaining after deducting COGS.

Gross Margin. Gross profit expressed as a % of revenue.

Operating Expenses. Expenses required to run the business.

EBITDA. Earnings before interest, taxes, depreciation, and amortization.

Operating Income (EBIT). Profit from operations before interest and taxes.

Net Income. The amount remaining after all expenses have been deducted from revenue.

Cash In − Cash Out = Net Cash Flow.

Cash Flow. The movement of cash into and out of a business.

Operating Activities. Cash generated from normal business activities.

Investing Activities. Cash used for purchasing or selling long-term assets.

Financing Activities. Cash received from or paid to lenders and owners.

Free Cash Flow. Cash remaining after operating expenses and capital expenditures.

Current Ratio = Current Assets ÷ Current Liabilities. Short-term ability to meet obligations.

Working Capital = Current Assets − Current Liabilities. Dollars available to fund day-to-day operations.

Accounts Receivable Turnover (A/R Turns) = Annual Credit Sales ÷ Average A/R. How efficiently customers are paying.

Days Sales Outstanding (DSO) = 365 ÷ A/R Turns. Average days to collect from customers.

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory. How quickly inventory is sold and replaced.

Days Inventory Outstanding (DIO) = 365 ÷ Inventory Turns. Average days inventory remains on hand.

Accounts Payable Turnover (A/P Turns) = Annual Purchases ÷ Average A/P. How efficiently vendor bills are paid.

Days Payables Outstanding (DPO) = 365 ÷ A/P Turns. Average days to pay vendors.

Cash Conversion Cycle (Cash Cycle) = DSO + DIO − DPO. How long cash is tied up in operations.

Debt-to-Equity Ratio = Total Liabilities ÷ Total Equity. Amount of debt used to finance the business.

Gross Margin % = Gross Profit ÷ Revenue. Profit after direct costs as a % of revenue.

Net Profit Margin % = Net Income ÷ Revenue. Overall profitability as a % of revenue.

Return on Assets (ROA) = Net Income ÷ Total Assets. How effectively assets generate profit.

Return on Equity (ROE) = Net Income ÷ Total Equity. Return generated for the owners.

Return on Investment (ROI) = Net Profit ÷ Investment. Profit relative to investment.

A successful business leader understands three things: Profitability — is the business making money? Liquidity — does the business have enough cash? Financial position — is the business financially healthy?

The balance sheet, income statement, and cash flow statement work together to answer these questions.

The Law of the Lid. Leadership ability determines a person's level of effectiveness. The higher your capacity, the greater your impact.

The Law of Influence. True leadership is influence — nothing more, nothing less.

The Law of Process. Leadership develops daily, not in a day. Growth requires intentional effort over time.

The Law of Navigation. Leaders chart the course. They see farther ahead and prepare others for the journey.

The Law of Addition. Leaders add value by serving others and helping them succeed.

The Law of Solid Ground. Trust is the foundation of leadership. Character and integrity build trust.

The Law of Respect. People naturally follow leaders who are stronger or more capable than themselves.

The Law of Intuition. Leaders evaluate everything through a leadership lens and often sense opportunities and challenges before others do.

The Law of Magnetism. You attract people who are like you. Your character and values shape the people you draw to your team.

The Law of Connection. Leaders touch a heart before they ask for a hand. People follow leaders who genuinely connect with them.

The Law of the Inner Circle. A leader's potential is determined by those closest to them. Strong leaders build strong teams.

The Law of Empowerment. Great leaders give power away by developing and trusting others.

The Law of the Picture. People do what people see. Leaders must model the behavior they expect.

The Law of Buy-In. People buy into the leader before they buy into the vision. Trust and credibility come first.

The Law of Victory. Leaders find a way for the team to win, regardless of obstacles.

The Law of the Big Mo. Momentum is a leader's best friend. Success creates energy that makes future success easier.

The Law of Priorities. Activity is not necessarily accomplishment. Leaders focus on what matters most.

The Law of Sacrifice. Leaders must give up to go up. Greater leadership requires greater sacrifice.

The Law of Timing. Knowing what to do is important; knowing when to do it is equally critical.

The Law of Explosive Growth. To add growth, lead followers. To multiply growth, develop leaders.

The Law of Legacy. A leader's lasting value is measured by succession and the impact left behind.

Leadership is not about authority or position. It is about influence, service, development of others, and leaving a legacy.