Issue 01 · Part One · Introduction
Finance, the CFO and the six tasks
Finance is completely different from accounting. This issue sets the map for the whole course: who the CFO is, what the CFO does, and the tools behind each task.
الهدف من المادة مش إنك تبقى محاسب بيسجّل قيود. الهدف إنك تفكر بعقلية القيادة: هل الشركة بتكسب عائد أعلى من تكلفة فلوسها، وعندها سيولة تكفي التزاماتها والفرص اللي قدامها؟
Where finance sits
Every organization has its own chart, but the pattern holds: the CFO reports to the CEO, and both Accounting and Finance report to the CFO.
المحاسبة بتبص لورا وبتسجّل اللي حصل بالقواعد، والمالية بتبص لقدام وبتقرر. وزي ما المستشفى محتاج قسم أشعة دقيق عشان الجراح ياخد قراره صح، الشركة محتاجة محاسبة سليمة عشان القرار المالي يتبني على أرقام حقيقية.
GAAP and IFRS
GAAP
Generally Accepted Accounting Principles: a strict set of rules companies follow when they write financial reports, issued by the Financial Accounting Standards Board (FASB) to ensure consistency and transparency.
IFRS
International Financial Reporting Standards: a set of accounting rules for how information should be gathered and presented in financial reports.
الفكرة زي الكود الهندسي: كل الشركات بتكتب قوائمها بنفس القواعد، فأي مستثمر أو بنك يقدر يقرا ويقارن من غير ما يتوه.
The CFO's six tasks
This tree is the map of the whole course. Learn each task together with its tools.
CFOAccounting + Finance
1Financial Analysis
Sources & uses of moneyFinancial ratiosNetwork of ratiosMVA · EVA
Issue 022Financial Forecasting
Forecasted financial position% of sales methodLinear regression
Coming up3Planning & Control
BudgetingBreakeven analysisOperating leverage
Coming up4Financial Hierarchy Important
Sources of financeCosts of financeWACC
Part 2 · Cost of capital5Investment Decisions
SRRPBPNPVIRR
Defined in issue 016Asset Management
To be detailed
Coming up
الدكتور سأل سؤالين في المحاضرة لازم تكون جاهز لهم: هل كل منظمة لازم تعمل توقعات مالية؟ وهل كل منظمة لازم تخطط وتراقب؟ الإجابة العملية إن التوقعات مش دايمًا إلزامية بالقانون، لكن التخطيط والرقابة جزء من الإدارة نفسها، لأن الموارد محدودة والمستقبل مش مضمون.
Investment decisions: the capital budgeting toolkit
Decisions are made in two cases, under certainty and under uncertainty, using two families of tools.
Profitability analysisSRRSimple rate of return. Compares the initial investment to the final value; a basic indication of profitability.Quick screen. Ignores timing.
Profitability analysisPBPPayback period. Time expected before the investment is returned as income.Prefer the shorter PBP.
Discounted cash flowNPVPV of cash inflows minus PV of cash outflows over a period.Accept if NPV > 0.
Discounted cash flowIRRThe discount rate at which NPV equals zero; used to accept and rank projects.Accept if IRR > cost of capital.
الأداتين الأولانيين زي الكشف المبدئي: سريع ومفيد للفرز. لكن القرار الكبير بيتاخد بـ NPV وIRR، لأنهم بيحسبوا إن الجنيه النهارده أغلى من الجنيه بعد خمس سنين.
Case: the value of a CFO
In March 2015 Google hired Ruth Porat, then CFO of Morgan Stanley, as CFO with a package worth more than $70 million: a $650,000 base salary, a $5 million signing bonus, $25 million in stock, and a $40 million grant every two years from 2016. At Morgan Stanley she had earned $8–11 million a year. She later became President and Chief Investment Officer of Alphabet, and has discussed AI cooperation with Abu Dhabi, which aims to be the first fully AI-driven government by 2027.
جوجل ماكانتش بتدفع الرقم ده لحد يمسك الدفاتر. كانت بتدفع لحد يقرر مليارات الاستثمار تروح فين. وده الفرق بين المحاسبة والمالية في جملة واحدة.
Issue 02 · Part One · Lecture 2
Financial Analysis and Capital Budgeting
The first CFO task in depth: where money comes from and goes, how to read statements across years and within a year, and how ratios and value metrics show whether a firm creates wealth.
What financial analysis is for
Financial analysis evaluates businesses, projects, budgets and other transactions to determine their performance and suitability. Overall, it tests whether a company earns a return on capital at least equal to its cost of capital, and generates enough cash to meet obligations and pursue opportunities.
It is used to
- Evaluate economic trends
- Set financial policies
- Build long-term plans for business activity
- Identify investment opportunities
It reads three statements
- Income statement
- Balance sheet
- Cash flow statement
Reviewed by management, investors and lenders to assess the company's financial position.
الشركة محتاجة مؤشرين سليمين في نفس الوقت: عائد أعلى من تكلفة الفلوس، وسيولة تكفي. زي الضغط والنبض، واحد سليم مايكفيش لو التاني فيه مشكلة.
Sources and uses of funds
The slide says "money (not cash)" on purpose: funds are broader than the cash in the bank. In modern finance, "Sources and Uses of Funds" is the preferred term.
Sources · inflows
- Operating cash flows
- Bank loans
- Issuing shares (equity)
- Issuing bonds or other debt
- Sale of assets
- Retained earnings
→The firm→
Uses · outflows
- Purchasing fixed assets
- Financing working capital
- Repaying loans or debt
- Paying dividends
- Acquiring another company
- Research and development
- Capital expenditures (CapEx)
- Operating expenses
The statement helps managers, investors and lenders see where financing comes from, how funds are allocated, whether funds are sufficient for planned activities, and whether projects are financially feasible.
البيان ده بيجاوب على سؤالين: الفلوس جت منين، وراحت فين. والبنك أول ما يشوفه بيعرف هل التمويل مناسب للاستخدام، ولا الشركة بتصرف قروض طويلة الأجل على مصاريف يومية.
Horizontal analysis
% change = (Current period − Base period) ÷ Base period × 100
Select several years of comparable data, take one as the baseline (often the oldest), and compare every later year to it. The result shows which accounts are growing (hopefully revenue) and which are shrinking (hopefully expenses).
Company ABC
الربح قفز 66%، لكن المحتجز زاد 3% بس. يعني معظم ربح السنة اتوزع أو اتصرف، وده استنتاج ماكانش هيبان من غير المقارنة.
Weaknesses: choosing a base year is hard; it shows change without explaining the cause; it is vulnerable to changes in accounting methods; it ignores inflation, so rising amounts may reflect prices rather than real growth.
المبيعات زادت 20% بس التكلفة جريت أسرع بكتير، فصافي الربح نزل رغم إن الشغل زاد. زي محطة زاد إنتاجها لكن تكلفة المتر زادت أكتر، فكل متر بقى بيكسّب أقل.
Vertical analysis
Vertical % = Income statement item ÷ Total sales × 100
Choose one benchmark line, most often net sales, and express every other line (COGS, gross profit, operating profit, net income) as a percentage of it. Companies then track how those percentages change over time.
Weaknesses
- Does not follow accounting standards and principles
- Cannot measure the company's liquidity
Slide 17 lists "horizontal analysis alone cannot assess liquidity" under vertical analysis. It reads like a typo for vertical; check with the lecturer.
من كل 100 جنيه مبيعات، 8 جنيه بس فضلوا ربح. والنسب دي بتخليك تقارن شركة صغيرة بشركة عملاقة على نفس المقياس.
Ratio analysis and the network of ratios
Ratio analysis
A quantitative method of gaining insight into a company's liquidity, operational efficiency and profitability. It is a cornerstone of fundamental equity analysis.
Network of ratios
Also called a pyramid of ratios or the DuPont system. It links ratios so that one cascades into or multiplies another, revealing the root cause of performance.
ROE = Net margin × Asset turnover × Equity multiplier
The DuPont formula is the classic example; the slides define the concept.
بدل ما تبص لكل نسبة لوحدها، بتشوف إزاي بتأثر في بعض. العائد نزل؟ تنزل خطوة خطوة: المشكلة في الهامش، ولا في دوران الأصول، ولا في حجم الديون؟ زي شجرة الأعطال في الصيانة بالظبط.
Modern techniques: MVA and EVA
Market Value Added
Total wealth a company has created for its investors since inception: current market value minus the capital originally contributed by bondholders and shareholders. Positive means wealth created; negative means wealth destroyed.
MVA = Market value (equity + debt) − Total capital invested
Worked example: Apex Corporation
EVA = NOPAT − (Capital invested × WACC)
المستثمرين حطوا 400 مليون، والسوق شايف الشركة دلوقتي بـ 600. الـ 200 مليون الفرق هي الثروة اللي الإدارة صنعتها. أما الـ EVA فبيسأل سؤال السنة دي: الربح التشغيلي غطّى تكلفة كل الفلوس اللي شغالة في الشركة ولا لأ؟
