Attendance: Chris, Aaron, Bernadeta, Dawn, Justin, Steffini
Summary:
The Dallas Personal MBA group recently began a new series of meetings designed to help its members learn about the core concepts of business. Our first two meetings in this series focused on the BLAST program; an online interactive training program that teaches people the fundamental concepts of Finance and Accounting.
Finding out about the BLAST program was a welcome surprise. After spending a night at a local bookstore sifting through books on Finance for Non-Financial managers, I did not find any that I was very excited about using for the group. Most of the books were very dry, and none that I could find included a thorough case study we could use for the purposes of analysis and discussion. So, when I reached out for advice to Darrel Mullis, author of The Accounting Game, I was happy to learn what he had created with the BLAST Program.
The BLAST program is organized into two modules, and each includes a participant guide. The first module introduces the student to business concepts like innovation and leverage, as well as the fundamental pieces of financial accounting including the balance sheet, income statement and cash flow statements. The second program takes you into a very in-depth analysis of financial statement ratios that show how one can draw insight from each of the key financial statements.
What is really neat about the program is its interactive nature. Instead of just distilling information, it tends to teach through interesting scenarios. For instance, in teaching the user about what goes on in the income statement, a funny character named Billy Buffet (see picture) is introduced to help you walk through a series of transactions to show what should be included. Interactive examples like this are abundant throughout the program.
The participant guides were also very interesting. These are set up to help a student study the concepts of the program and how they relate to his or her own company. Since no two of us in the group actually work for the same company, I asked members to assume they worked for Proctor and Gamble and do their research in that context. I had fun with this activity and learned a lot about how to analyze a company through the process. Proctor and Gamble also made for a great case study because its executives are prominent experts in business philosophy and regularly write articles for Harvard Business Review and other publications. I also had fun working through the analysis of its consolidated financial statements and figuring out things like its gross margin, performance ratios and where its cash flow goes.
Our Meetings:
At the start of the training, we had originally scheduled only one meeting to discuss the program, but after making my way through part of the material I realized there was far too much material for us to thoroughly cover the program in one night. So at the end of the second meeting, a subset of our original group decided to meet again to review the concepts.
For the first meeting, I stuck with our usual book discussion format. I created a list of questions and let everyone take a shot at answering them. For most subjects this format creates a great environment for reviewing and learning the material, but here, I realized that for some reason, it wasn’t working as well. I think it’s because the material is a little more technical than what we usually cover.
So for the second meeting, I asked our resident financial wizard, Aaron McNiel, to lead the discussion in a more lecture-based format. Aaron put together an excellent presentation, complete with slides and managed to cover many topics in two hours.
Below are the questions we used for discussion:
1) Why do you think it is important for people at different levels of a company to understand how their company makes money?
2) Who is Proctor and Gamble? What businesses is the company in?
3) What are the 6 major principles that drive strategy in a business? Let’s take turns and briefly summarize each one.
4) What is Proctor and Gambles niche? Which areas are facing challenges and what are they?
5) How does Proctor and Gamble view innovation and how does it manage the process?
6) How does Proctor and Gamble view market research and what are some of the ways it gathers it?
7) What is the purpose of balance sheet? What goes on it? How is it organized? How does it relate to the basic accounting equation?
8) What does the cash flow statement show us? How does it relate to the balance sheet? What are the three types of cash flow and what does each one represent?
9) What is the accrual accounting method? How does this relate to expenses like rent or office equipment?
10) How is income different from cash? What are some of the ways companies can get in trouble from poor cash management, and how can they prevent these things from happening?
11) What are the two general categories of costs, and how are they different?
12) What is the purpose of the income statement? What is the structure of the income statement? How does it relate to the balance sheet?
13) What are three questions you can ask yourself to determine whether a transaction should appear on a balance sheet? What is the difference between an order and a sale?
14) What are the bottom lines shown on an income statement? How is each important?
BLAST Class 2
1) What are the three bottom lines, how do they relate to each cash statement? Why might you want to analyze these? What do you want to see happening to each bottom line?
2) What are the three drivers of net income? What are some strengths of this measure, and what are some weaknesses?
3) Why is it helpful to use a ratio as a KPI rather than just looking at trends of raw numbers? What ratios or KPIs can be used to analyze net income?
4) How is Proctor and Gamble fairing in relation to each of these ratios? What are some off the factors responsible for its performance?
5) What are the drivers of operating cash flow (OCF)? Why is it the most important overall item on the cash flow statement?
6) What are the three basic tests of OCF performance, and why is each one important? How is P&G doing in relation to each of these tests?
7) What are the KPIs that can be used to further analyze OCF? Why are they important? How is P&G doing in relation to each KPI? Is there anything you can suggest it do to improve OCF?
8) What are the 7 primary ways that a company can utilize its cash flow? What might the way in which a company allocates its cash suggest?
9) Where would an analyst spot each of the ways a company is using its cash?
10) Where did P&G choose to spend its cash last year? What do its choices suggest?
11) What is ROA? Why is it a bottom line on the balance sheet? What do you want to look for when analyzing ROA?
12) What are some of the KPIs that can be used to analyze the health of a balance sheet? Why are they important, how is Proctor and Gamble doing in relation to each?
13) What is capital structure? What does P&Gs capital structure look like? What are the advantages and disadvantages of this situation?
14) What is your overall impression of the financial health of P&G?
