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Gross Margin vs. Operating Margin vs. Net Margin - Cheat SheetWant to analyze an income statement -- fast?Pay attention to these three margins!GROSS MARGIN 📊Gross margin is a profitability metric that indicates the percentage of revenue that remains after subtracting the cost of goods sold (COGS).It reflects the portion of each sales dollar that contributes to covering operating expenses and generating profit.Gross margin is a crucial metric to assess the profitability of a company's core production or manufacturing activities.Calculation 🔢Gross Margin = Gross Profit / RevenueGross Profit = Revenue - COGSThree ways to improve Gross Margin→Lower Cost of Goods Sold→Increase Prices→Product mixOPERATING MARGIN 📊Operating margin, also known as operating profit margin, measures the percentage of operating income (profit after operating expenses) relative to total revenue.It provides insights into a company's operational efficiency and ability to manage operating expenses.Operating margin is calculated using operating income, which is derived by subtracting operating expenses (OPEX and SG&A) from gross profit.Calculation 🔢Operating Margin = Operating Income / RevenueThree ways to improve Operating Margin→Control operating expenses→Efficiency improvements→Revenue enhancementNET MARGIN 📊Net margin, also referred to as net profit margin or simply profit margin, represents the percentage of net income (profit after all expenses, including interest and taxes) relative to total revenue.It indicates the portion of each sales dollar that results in net profit.Net margin is the final measure of profitability on the income statement, considering all expenses, including taxes and interest.Calculation 🔢Net Margin = Net Income / RevenueThree ways to improve Net Margin→Expenditure Control→Tax efficiency→Interest managementTo analyze the income statement fast, watch how margins change over time.Was this helpful? Let me know in the comments section below!***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴 𝘃𝘀. 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 𝗖𝗵𝗲𝗮𝘁 𝗦𝗵𝗲𝗲𝘁Post by Oana Labes, MBA, CPA - Follow her!Because Accounting is Not Finance.🎯𝐇𝐞𝐥𝐩 𝐦𝐞 𝐬𝐩𝐫𝐞𝐚𝐝 𝐭𝐡𝐞 𝐤𝐧𝐨𝐰𝐥𝐞𝐝𝐠𝐞 𝐰𝐢𝐭𝐡 𝐭𝐡𝐢𝐬 𝐟𝐫𝐞𝐞 𝐂𝐡𝐞𝐚𝐭 𝐒𝐡𝐞𝐞𝐭: 𝐥𝐢𝐤𝐞, 𝐬𝐡𝐚𝐫𝐞 𝐚𝐧𝐝 𝐜𝐨𝐦𝐦𝐞𝐧𝐭!𝐖𝐚𝐧𝐭 𝐭𝐡𝐞 𝐟𝐫𝐞𝐞 𝐏𝐃𝐅?👉 𝐋𝐢𝐤𝐞 𝐚𝐧𝐝 𝐜𝐨𝐦𝐦𝐞𝐧𝐭 𝐭𝐨 𝐠𝐞𝐭 𝐭𝐡𝐞 𝐝𝐨𝐰𝐧𝐥𝐨𝐚𝐝 𝐥𝐢𝐧𝐤.Accounting and Finance and not the same.They define value differently.They have different objectivesThey have different perspectivesThey require different technical skills.Knowing how they differ will help you appreciate how each of them ads value.Knowing how they work together will help advance your career.👉 𝐇𝐞𝐫𝐞 𝐢𝐬 𝐰𝐡𝐚𝐭 𝐭𝐡𝐞 𝐅𝐢𝐧𝐚𝐧𝐜𝐞 𝐯𝐬. 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐂𝐡𝐞𝐚𝐭 𝐒𝐡𝐞𝐞𝐭 𝐢𝐧𝐜𝐥𝐮𝐝𝐞𝐬:🎯 Accounting vs. Finance Differences across Scope, Focus, Timeframe, Regulatory environment and Tools of their trade🎯 Accounting vs. Finance Designations to learn what they mean and what to pursue🎯 Accounting vs. Finance Careers to learn about their work🎯Accounting vs. Finance in the CFO Office🎯 Accounting vs. Finance KPIs to help you learn what to monitor🎯The Accounting Budget Flow to help you learn how budgets are built🎯20 Confusing Accounting Topics to help you differentiate between them🎯10 Essential Finance Skills for Managers to help prioritize what to learn🎯 The Financial Analysis Scorecard to help structure your financial analysis🎯5 Key EBITDA Ratios to help you make better use of EBITDAFollow Long Term Mindset for more content like this.***P.S. Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) → https://lnkd.in/eKbRV7g6If you found this post useful, please repost ♻️ to share with your audience

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EBITDA Vs FCFWhat's the difference?EBTIDA = EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATIONFORMULA: Net Income + Depreciation & Amortization +/- Non-Operating Income And Expenses + Interest + Income Tax Expense→ EBITDA measures a company's ability to generate profits before considering non-operating expenses such as interest, taxes, depreciation, and amortization.PROS:1: Comparability: EBITDA allows companies with different capital structures to be compared.2: Simplicity: EBITDA provides a quick snapshot of a company’s profit performance.3: Proxy for Cash Generation: EBITDA is often used as a fast way to measure a company's ability to generate cash from its core operations.CONS:1: Ignores Non-Operating Expenses: EBITDA excludes important expenses such as interest, taxes, depreciation, and amortization.2: Lack of Cash Flow Information: EBITDA does not provide an accurate insight into a company's ability to generate cash.3: Susceptible to Manipulation: EBITDA can be manipulated by adjusting accounting practices, making it less reliable.FCF = FREE CASH FLOWFORMULA: Net Income + Depreciation & Amortization +/- Non-Cash Income And Expenses +/- Changes In Net Working Capital - Capital Expenditures→FCF measures a company’s ability to generate cash from operations using cash accounting after deducting capital expenditures (CAPEX).PROS:1: Focus on Cash: FCF directly measures the cash generated by a company's operations.2: Flexibility: FCF is a better measure of a company’s ability to pay off debt and return capital to shareholders3: Hard To Manipulate: FCF is much harder for a management team to manipulate than EBITDA or Net IncomeCONS:1: Complexity: There are many varieties of FCF, which can make them time-consuming to calculate2: Volatility: FCF can fluctuate widely from year to year due to changes in working capital needs and capital expenditure spending cycles.3: Limited Comparability: Comparing FCF across industries is challenging due to differences in accounting practices and capital structures.Personally, I value Free Cash Flow 10x higher than EBITDA, but I understand why EBITDA is so widely used.Which metric do you use? Let me know in the comments below!***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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Key Finance & Accounting Roles ExplainedCredits to the post by Aleksandar Stojanovic, MSc. - Go follow him!Embarking on a career in Finance & Accounting?You would like to know where you fit and what to learn.Here’s a step-by-step guide to critical roles and responsibilities:🔘 CFO (Chief Financial Officer): For those who envision the financial big picture.1. Strategic Planning: Cultivate a holistic view of financial growth.2. Capital Structuring: Master the art of effective funding.3. Risk Management: Grasp crucial techniques to safeguard assets.4. Stakeholder Communication: Build bridges with investors and board members.5. Forecasting: Harness the power of future financial insights.🔘 Financial Analyst: Dive deep for those analytical minds.6. Data Analysis: Extract significant patterns from financial data.7. Budgeting & Planning: Understand the nuances of allocation.8. Performance Metrics: Discover vital KPIs for business health.9. Report Creation: Master the art of insightful reporting.🔘 Internal Auditor: For the diligent and detail-oriented.10. Risk Assessments: Spot vulnerabilities before they escalate.11. Process Evaluations: Streamline operations for efficiency.12. Compliance Checks: Ensure adherence to financial standards.13. Recommendations: Provide insights for optimization.🔘 Tax Specialist: Navigate the intricate maze of taxation.14. Tax Strategy: Formulate effective tax-saving methods.15. Compliance & Reporting: Adhere to the ever-evolving tax laws.16. Audit Defense: Safeguard against potential tax inquiries.17. Tax Forecasting: Predict future tax implications.🔘 Accountant: The backbone of everyday financial health.18. Record Keeping: Maintain pristine financial records.19. Financial Statements: Generate periodic business health reports.20. Reconciliation: Ensure accuracy in books.21. Tax Preparation: Assist in timely and accurate tax filing.These roles encompass different aspects of Finance & Accounting, catering to various interests and skill sets.Explore these areas, identify your interests, and tailor your learning path accordingly.Determined to elevate your financial strategy but unsure where to start?Follow Long Term Mindset for more content like this.***P.S. Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) → https://lnkd.in/eKbRV7g6If you found this post useful, please repost ♻️ to share with your audience

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IFRS vs GAAP - CHEAT SHEETAccounting is the language of business.In the United States, the accounting language is called GAAP, which stands for Generally Accepted Accounting Principles.The accounting language in the rest of the world is called IFRS, which stands for International Financial Reporting Standards.While both languages are similar, here are some noteworthy differences:IFRS 📜INCOME STATEMENT: 2 years allowedBALANCE SHEET: Increasing order of liquidityCASH FLOW STATEMENT: Flexibility with locationINTERIM REPORTS: Each interim period is an integral part of fiscal yearNON-STANDARD METRICS: Alternative EPS allowedR&D COSTS: Capitalized when specific conditions are metINCOME TAXES: Recognized as assets when probableINVESTMENT PROPERTY: A separate categoryBIOLOGICAL ASSETS: Included in inventoryLEASES: Single category on balance sheetCONTINGENT LIABILITIES: Recognized when > 50% likelyINVENTORIES: LIFO not allowedFIXED ASSETS: Fair value allowedINTANGIBLES: Fair value allowedLEASES: IFRS 16 effective 2019DEBT ISSUANCE COSTS: Costs are netted against the outstanding debtREVENUES: IFRS 15 effective 2018GAAP 📜INCOME STATEMENT: 3 years requiredBALANCE SHEET: Decreasing order of liquidityCASH FLOW STATEMENT: No flexibility with locationINTERIM REPORTS: Each interim period is an integral part of fiscal yearNON-STANDARD METRICS: Alternative EPS is prohibitedR&D COSTS: ExpensedINCOME TAXES: All differed taxes recognizedINVESTMENT PROPERTY: Not separateBIOLOGICAL ASSETS: Measured at fair value, separate from InventoryLEASES: Categories for operating & finance leasesCONTINGENT LIABILITIES: Recognized when > 75% likelyINVENTORIES: LIFO allowedFIXED ASSETS: HIstorical costINTANGIBLES: HIstorical costLEASES: ASC 842, effective 2018DEBT ISSUANCE COSTS: ASU 2015-03REVENUES: ASC 606, effective 2018Was this helpful? Let me know in the comments section below!All credit to Wall Street Prep for this great summary.***➕ Follow Long Term Mindset for more content like this.Want to master the basics of accounting (for free)?Enroll in our email-based course: Financial Statements SchoolGet started here (It's free) → https://lnkd.in/eKbRV7g6If this post was helpful, repost it ♻️ to share with your audience.

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𝗙𝗶𝗻𝗮𝗻𝗰𝗲 𝗗𝗲𝗽𝗮𝗿𝘁𝗺𝗲𝗻𝘁 𝗛𝗶𝗲𝗿𝗮𝗿𝗰𝗵𝘆Post by Abdul Khaliq - Follow him!Depending on the organization's size, the roles become specialized or require multitasking skills.In large corporations, each function is usually handled by a specialized individual.In SMEs, one individual may perform multiple functions.Nevertheless, the functions remain almost the same; somebody has to carry out these duties.The following job titles have been included:•The Finance Manager - Accounting manages day-to-day accounting operations and financial reporting.• Financial Reporting Specialist handles the preparation and presentation of financial statements.• Accounts Payable Accountant manages the organization's outgoing payments and vendor relationships.• Accounts Receivable Accountant is responsible for collecting outstanding payments from customers.• General Ledger Accountant maintains the company's financial records and ensures accuracy.• Fixed Assets Accountant manages and tracks the organization's long-term assets.• The Head of FP&A leads the Financial Planning and Analysis function, driving strategic financial planning, budgeting, and forecasting initiatives.• FP&A Manager oversees the entire Financial Planning and Analysis team, ensuring strategic alignment and effective financial decision-making.• FP&A Analyst conducts in-depth financial analysis, generates reports, and provides insights to support planning and decision-making processes.• Budget Analyst focuses on developing and managing budgets, analyzing variances, and collaborating with departments to optimize financial performance.• Head of Treasury strategically manages the organization's treasury function, overseeing risk management, liquidity, and financial planning.• Treasury Manager executes treasury strategies, monitors cash flow, and ensures financial risk management.• Cash Management Specialist optimizes cash position forecasts and implements strategies to enhance liquidity.• Bank Relations Officer handles relationships with financial institutions and negotiates terms.• Head of Risk Management leads the overall risk strategy.• Manager, Risk Management oversees day-to-day risk operations, implementing risk mitigation strategies.• ...Follow Long Term Mindset for more content like this.***P.S. Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Check it out here (It's free) → https://lnkd.in/eKbRV7g6If you found this post useful, please repost ♻️ to share with your audience

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