Financial Fitness Test


 

 

 

If you run your own business or a business unit of a large organisation, manage a sales operation or cost centre, you know how important it is to understand your financial reports. So how do you rate your financial smarts? Let’s put them to the test with this 3 minute quiz!

It’s simple – as you go through each of the areas below, tick off those items that you can honestly answer ‘YES’ to. Each question equates to 1 point. Once you’ve completed all the questions, add up your points to determine your score.

Whilst this test is not exhaustive, it should get you thinking about whether financial acumen is one of your strengths – and which areas you’d like to improve on.

Understanding your Organisation’s Financial Reports

  • Do you understand the Income Statement?
  • Do you understand which lines of the Income Statement you can influence?
  • Can you read a Balance Sheet or a Statement of Financial Position?
  • Do you know the definition of a Current, versus a Non Current, Asset and its relevance?
  • Do you understand the difference between Accrual and Cash Accounting?
  • Do you understand how to review the Cash Flow Statement?
  • Do you understand the concept of Depreciation and Amortisation?
  • Do you understand how GST is treated and which of the 3 key financial statements are going to be inclusive of GST and which exclusive?

Key Financial Ratios

  • Do you know the key financial ratios used by your organisation?
  • Do you know how to calculate EBIT and EBITDA and what each measures?
  • Do you know which Liquidity ratios are most relevant to your organisation?
  • Do you understand the difference between mark up and margin?
  • Do you understand how DSO, DIO and DPO are calculated and their relevance to your organisation?
  • Do you know which ROI measures are used?
  • In reading company annual reports do you understand basic EPS and diluted EPS?

Business Finance

  • Could you articulate the financial objectives of your organisation?
  • Could you describe the financial strengths, constraints and challenges of your organisation?
  • Have you had business cases approved (where you were responsible for the financial content)?
  • Do you understand what is involved in creating value for your organisation?
  • Do you understand the concepts of Payback, NPV and IRR?

Budgeting and Costing

  • Do you feel confident in preparing an operating budget on an accrual accounting basis?
  • Could you prepare a cash flow budget?
  • Do you understand Zero Based budgeting and why it became popular during the GFC?
  • Do you understand the true costs of the services your area provides – both direct and indirect?
  • Do you understand how indirect costs are allocated?
  • There are 4 variables which drive Revenue (Revenue = C x F x T x P) – can you identify them?
  • Do you know the key costs drivers for your area?
  • Do you understand the difference between Opex and Capex and their different accounting treatments?
  • Do you understand the differences between price, volume and timing variances and which are permanent and which temporary?
  • Could you predict the actual results for your area at the end of each month before you receive the report from finance?

  

What was your score?                                                                                      /30

 

Less than 25 points? You should come speak to us about how we can help you!

If you would like a copy of our Financial Cheat Sheet - a guide to each of these questions, please feel free to drop me a line at cherry@financialtrainingaustralia.com

 

Share this test with your colleagues so they can rate themselves too!