Business Acumen

About the Tutorial

Business Acumen is defined by the efficiency with which a business-person can
understand, interpret, analyze, and deal with a business situation in a professional and
profitable manner.

Managers having multiple responsibilities often tend to compartmentalize their own

thinking. This might help them in getting the job done, however it doesn’t keep the
manager ready to face an unforeseen situation. Business Acumen not only gives them the
chance to see things from a broader perspective but also makes them aware of the key
features that are needed to run an organization successfully.

This tutorial covers the basics of Business Acumen and what it takes to be a successful
business-person.

Audience
This tutorial has been designed primarily for young professionals who are interested in
understanding what the company expects of them and how they are supposed to interpret
their responsibilities.

Prerequisites
Before proceeding with this tutorial, you are expected to have a calm mindset and be open
to exploring the suggestions mentioned here.

Disclaimer & Copyright

 Copyright 2015 by Tutorials Point (I) Pvt. Ltd.

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of the publisher.

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in this tutorial, please notify us at [email protected]

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 Business Acumen

Table of Contents
About the Tutorial .................................................................................................................................... 1

Audience ................................................................................................................................................... 1

Prerequisites ............................................................................................................................................. 1

Disclaimer & Copyright ............................................................................................................................. 1

Table of Contents ...................................................................................................................................... 2

1. WHAT IS BUSINESS ACUMEN? .............................................................................................. 3

2. DEFINING BUSINESS ACUMEN .............................................................................................. 5

3. BUSINESS ACUMEN FOR MANAGERS ................................................................................... 6

4. BUSINESS ACUMEN FOR EMPLOYEES ................................................................................... 9

5. BUSINESS ACUMEN FOR HRS.............................................................................................. 11

6. QUESTIONS YOU SHOULD ASK YOURSELF .......................................................................... 12

7. KEY DRIVERS OF BUSINESS ACUMEN .................................................................................. 13

8. FINANCIAL LITERACY IN BUSINESS ACUMEN ...................................................................... 15

9. BUSINESS PROFICIENCY ...................................................................................................... 17

10. CULTIVATING BUSINESS ACUMEN ...................................................................................... 19

11. THE BIG PICTURE ................................................................................................................ 27

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 1. WHAT IS BUSINESS ACUMEN? Business Acumen

Business Acumen is the art of learning a set of important skills that are needed to be a
successful professional. A good sense of business acumen is critical in analyzing the factors
that drive a company's performance, like market orientation and strategic implementation.

People tend to simplify Business Acumen as just a set of common sense decisions that
reflects the way a company runs. They assume that it only involves brainstorming and
persuasion skills. Some are convinced that it's something that's gifted to some people
since birth.

To allay any such apprehensions that might crop up in the minds of our readers, let's go
through an interesting case study of Southwest Airlines.

Southwest Airlines – 33 Years of Profitability

Southwest Airlines was founded in 1971. As of December 2014, the airline has about
46,000 employees with more than 3,400 flights scheduled per day. Undoubtedly, this is a
big airline but what's more striking about them is that they are the ones who are in the
business with a record 33 straight years of profitability.

This fact will seem more striking when we look around how the rest of the industry has
suffered during the years Southwest was making profits. Many of their competitor fliers
have since then shut down, declared bankruptcy or merged. Southwest, on the other hand,
goes for the same planes and jet fuels and still manages to pay its employees extremely
competitive salaries and benefits.

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 Business Acumen

Now that's something many businesses would love to emulate. After all, running such a
large organization so successfully for that long means that they must be doing something
right. By their own admission, the secret lies in their motivational culture.

Southwest Airlines has a one-of-its-kind inclusionary method of involving its employees

in the company's business functioning, and it pays a huge importance on providing the
best customer service. Their inclusionary method of training includes their Management
sharing and explaining the company's financial reports, targets, bottom lines, profits and
percentages to its employees. They don't just share the details but also make the people
understand what the numbers mean.

It is this open culture that encourages employees to get involved with their job, which in
turn motivates them to provide top-class service to their passengers while keeping the
expenses in check.

In other words, the management goes out of its way to develop their employees' Business
Acumen. By encouraging them to think like employers and business-persons, they
are making the working process transparent by inviting questions from their employees
and managers on not only their own departments, but also those of others.

This leads them to discuss the finer details of their operations like processes, products,
staffing along with other innovative designs, decisions and actions which make their
service better.

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 2. DEFINING BUSINESS ACUMEN Business Acumen

Business Acumen can be defined as a collective and inclusive understanding of how

business operates and how it generates profitability, which in turn helps in sustaining the
profitable run and also contributes in its growth, whether in present or in future.

Business Acumen involves a keen sense of business practices that is so critical to make
money through financial literacy and strategies that yield positive results. It is the
understanding of the ways an action today can impact certain factors in the future.

It's not only about reading and understanding a financial report and understanding the
terminologies mentioned there such as gross output, profits, costs, quarterly investments,
etc. It's also the ability to analyze the data supplied on the financial report and see how
the different numbers add up and the long-term, far-reaching effects of these numbers.

Financial Acumen is a part of business acumen that requires an innate understanding of

profitability, cash flows and financial statements. It helps to make an accurate assessment
of external factors like competition and changing market paradigms that may influence
the business. Analyzing competitive data, understanding the changing behaviors and
preferences of customers and current trends are all a part of financial acumen.

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 3. BUSINESS ACUMEN FOR MANAGERS Business Acumen

Managers with a good sense of business acumen realize that it's not enough for them to
cut costs and increase sales. They very well understand the far-reaching effects of
certain decisions taken in the present that could have a bearing on their future operations.

The staff of a company can be broadly categorized into three groups:

 Managers
 Employees
 Human Resource Managers (HRs)

Let’s see how important Business Acumen is for each one of them. We will start with
managers.

Department-Only Managers
There is a tendency with managers to think of their department as the company itself.
Their approach towards their department is like that of an isolated entity which is
independent of influences from other departments.

This "department only" viewing of the business leads them to think only of their job
responsibilities and meeting the targets set for their department staff. While putting
numbers on board is vital for the business to sustain, this narrow and restrictive thinking
of managers often reflect in the body language and efficiency of the staff.

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 Business Acumen

To be a successful manager, it takes a lot of correct decision-making at multiple levels,

and on a daily basis. It requires an insightful understanding of processes, expenditures,
preferences, customers' changing demands, and the different projects that are in
operation – both internally and with competitors. Managers at all levels need to make
decisions that lead to significant organizational changes.

It's often noticed that some managers are involved only in the development of their
departments. Although these measures might yield great results in the short run, it has
been observed that the staff gets dissociated from the rest of the organization and the
decision-making of the manager leads his department towards improvement at the cost
of other departments.

Do-it-yourself Managers
A manager who tries to do everything by himself by taking up much of the work assigned
to his team might succeed in creating a perception in the minds of his staff that he can do
everything. This might even lead to great output quality, as the manager is himself
involved in all the different processes.

However, this approach can work only when the team is very small. When the number of
people keep increasing and the process starts blooming, this do-it-yourself approach
will ultimately lead to the manager taking too much work on himself and making the team
feel isolated from the process.

This creates the issues of missing deadlines, the manager thinking some of the staff can
be dispensed when they are all perfectly willing to do the job but haven't been assigned
any. This ultimately creates a negative wave of insecurity that spreads all across the
organization.

Actions like these earn the entire company some terrible press through the bad-mouthing
of those disgruntled employees who are asked to leave. This is one of the biggest fallacies
in the world of managerial decision-making in recent years.

One big reason behind the managers making such mistakes is that they are generally
promoted based on their technical expertise in their domain. This means that they have
attained success in their domain only and have no exposure to the way the rest of the
departments function. In other words, they don't have the financial literacy and business
acumen needed to have an understanding of how a small decision taken today could
impact the process in the long run.

A good manager wouldn't pass the buck with the excuse that it's not the staff but the
customer who is shouting. A good manager will understand that the shouting is disturbing
the other customers who will consider this distraction as poor customer service.

A successful manager needs to be able to share the credit of success, as well as being
accountable for his entire team. If the right decisions are not taken at the present, they
could end up creating big challenges for the organization itself in the long run.

Tunnel-view Managers
Corporates are now seeing an increasing number of people coming to work with their
"specialist" cap on. People like these would like to be hands-on in addressing issues that
cater to their expertise and would rarely venture out of their comfort zone. They don’t look
beyond their horizon because the company already has a collection of experts and
meddling in things that you don't have "expertise" on could be a waste of your own time

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 Business Acumen

– it could be easily taken care of by someone else with some expertise on the desired
subject.

This approach makes sense from the viewpoint of an employee who has been tasked the
responsibility of a specific work and his job is to provide optimal output. However, when
the same employee performs well and gets promoted in his own domain to become a
manager, he thinks of the new job as something similar to the one he had earlier, where
all he had to do was to take care of only his own department and leave the rest to the
specialists in his team to do.

He doesn’t feel wise to meddle with affairs beyond his job and sticks only to his job
responsibilities. It makes him myopic who won’t keep himself abreast with the latest trends
in the business world. As a result of which, they also won’t be able to take preemptive
measures to avert unforeseen, unpleasant situations arising in the future.

Such a narrow vision can be dangerous for a manager where they tend to neglect the
effect of wasting assets without extracting maximum returns from them. They won't have
a clearly-defined objective or set of responsibilities for their team members.

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 4. BUSINESS ACUMEN FOR EMPLOYEES Business Acumen

It was never in question that Business Acumen is vital for managers, however it is now
being increasingly promoted as a need for the employees as well. This couldn't be truer
for the people who are working as frontline employees for the organization.

Those who are in customer service are directly involved in dealing with customers. In
today's world of social media, one small mistake from any of these employees could cost
a company its carefully-honed reputation and the brand image that they have built
over the years.

The Case of an Unfortunate Employee

Let’s take an example of an unfortunate employee caught in the direct line of fire of
a customer's wrath recently, at a fast food chain.

This customer claimed that she had ordered a box of donuts from their eatery the day
before and had paid for it, but didn't get the receipt for the purchase. Now as a policy of
this particular eatery, if a customer claims that he hadn't received a receipt for what he
has ordered, the company provides the entire order free.

But there is a catch. This service is only for that day itself, and that's exactly what this
particular customer was all riled up about: she wanted a free meal for not getting the
receipt of a purchase made the day before.

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 Business Acumen

Although her demands were not covered in the company's policy and the customer service
representative politely made it clear that her request would have been perfectly
redeemable had she only made it the previous day, the customer was in no mood to budge
and kept shouting expletives, racist slurs and abuses at the girl behind the counter, who
was at her wits' end by now.

Finally, the girl's patience gave in and she started to match word-for-word with the
customer. At this point of time, someone in the queue made a video out and posted it on
some social networking sites. Those who saw it thought it was the customer service agent
who had started the fight and was abusing the customer, which would be anyone’s first
impression because the video didn’t have the part where the customer started it all.

It was viewed and reviewed millions of times all over the world causing a major
embarrassment to the company and seriously tarnishing its image of a customer-centric
company.

When this video was played at a training session by a manager of the same company, in
front of other frontline employees, almost everyone agreed that the customer care
representative didn't necessarily pick up the right thing to do. However, they themselves
were found short of ideas when asked how they would have handled a similar situation.
This exposed the knowledge of differentiating between right and wrong (common sense)
and knowing what to do in this situation so that the company wouldn't have suffered that
way (business acumen).

The best possible alternative for the customer care representative would have been to
escalate the issue immediately to a supervisor or shift manager, when she found that the
problem was getting out of hand. In fact, many managers deal with situations like these
by politely giving the customer what he wants without giving him time to create further
ruckus and disturbance.

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 5. BUSINESS ACUMEN FOR HRS Business Acumen

HRs draft company policies, design the employee rules & regulations, and recruit the staff
needed for the company. Of late, many HRs have been asked to take an active interest in
the way the business is run so that they can understand the exact nature of work and
what workforce is needed for that.

Gone are those days when the HRs just changed the letterheads and the names of the
companies from their predefined set of policies and regulations. Now HRs are expected to
draft a fresh set of policies depending on the working style of the company, and sometimes
even individual departments.

There have been instances of HRs drafting a completely different set of policies for specific
employees with different working preferences. With the Equal Opportunity Provider
movement being widely adopted, there is a need to be proactive and design specific sets
of rules and working processes for talented employees who are also differently-abled.

When the HRs learn Business Acumen, they will start thinking of the way their recruitments
will impact the performances of the company as a whole. It will expose them to concepts
like cash management, fraud minimization, strategic decisions, and understanding
potential competition.

Unlike those at Southwest Airlines, many HRs working with other organizations haven't
been educated on seeing the big picture. That's the reason they don't understand what
their job demands. They don't see the link between their actions and the long-term effects
of these actions. These differences in actions and their end-results when multiplied by
thousands of employees, can prove to be a real setback for the company.

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 6. QUESTIONS YOU SHOULD ASK YOURSELF Business Acumen

To understand Business Acumen, it's extremely important for all the employees of an
organization to ask themselves certain vital questions that have traditionally been left to
the managers. This is critical for connecting them with the company, making them
understand the workings of the organization and also analyzing their role in the greater
scheme of things.

In short, the employees need to be able to see the big picture and to do so, they need to
know the answers to:

 Whether production costs have gone up and if they have, then what are the most
plausible reasons for the raised prices?

 Whether there were any price-changes from the company's end, and if there were
changes, how did they impact the profit margin of the company?

 Whether our competitors are performing better than us, and if they are, then
what are the areas they are leading us in?

 Whether there has been any change noticed in the customers' requirements and
behavior, or in the latest buying trends?

 Whether there have been any recent sales trends that have caught the customers'
attention because of word-of-mouth publicity?

 Whether any increase in the production costs of the company will impact the staff
financially and employment-wise?

 Whether greater production-volume can be achieved through same production-

cost, and whether the output can be maximized with available resources?

 Whether raising prices of products/services will impact sales numbers and

influence customers' buying decisions?

When questions become more specific and focus on a specific point, the answers follow
suit and become precise too. However, many current organizations have to deal with
various issues because they don't ask themselves these questions hard enough, nor do
they ask their employees to think on these lines.

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 7. KEY DRIVERS OF BUSINESS ACUMEN Business Acumen

Businesses run on four major parameters: Cash, Assets, Profit, and Growth. Let’s analyze
each parameter one by one.

Cash
Many people tend to confuse cash with revenue, however nothing could be more
different. A person operating his own bakery shop and selling a lot of cakes, pastries, and
bagels by the end of the day might say that his revenue for the day is the cash that is
deposited in his cash counter's ledger desk.

However, if he supplies all the bakery products in a wedding and raises an invoice of $2000
to be paid the next month, his revenue could be $2000, but his cash is zero. It's important
to know the difference between these two terms because it's cash, and not revenue,
that drives the business.

There are certain terms that people need to be familiar with to understand the functioning
of a business. They are:

 Cash position – amount of cash that is available at any given time

 Liquidity – the immediacy of obtaining the cash available
 Cash flow – cash invested vs. cash received

Going by the previous example, if the expenses born by the baker to get things ready for
the wedding amount to $400, then his cash flow is –$400.

Assets
Assets are things that are needed to establish and run a business. They include the office
premises, the building in which the company has been set, the land on which the company
has been built, and the supplies needed for the employees to complete daily tasks such as
internet, telephone, computers, etc.

It also includes the investment and cash. The stronger the assets of a company, the more
trustworthy it is perceived as. Companies with strong assets are often thought of as stable
companies who can easily meet their financial obligations through their greater liquidity.

This is called the "asset strength" of a company. Asset utilization is the effectiveness
with which the assets are being used in the company and how much efficiency it brings to
the work process.

Profit
Profit is defined as the difference in the amount of cash spent in expenses and the revenue
generated. For any company to survive, flourish and then sustain, it's imperative that it
generates real profits, unlike pseudo-profits where the margin of profit versus expenses
could be eliminated through market-based fluctuations like production costs and inflation.

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 Business Acumen

Growth
Growth is a key driver behind the success of any business. Startup companies tend to
stick to what is working for them because their management thinks that they have hit the
"magic formula" and any deviation will cause them to lose their new-found success.

Sticking to a magic formula might work for a startup company, as they need to consolidate
their position in the market without trying too many things at the same time. However,
the same strategy could spell disaster to an already-established companies.

You will always have startup companies who are hungry to succeed and take a share of
the market pie. On the other hand, an established company might hit stagnation by
catering to the same market over a long period of time.

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8. FINANCIAL LITERACY IN BUSINESS ACUMEN Business Acumen

Financial literacy deals with an employee’s understanding of the way a business is run
which gives him a deeper insight into the financial parameters of a company. Organizations
nowadays are investing a lot of time in building the financial literacy of their employees,
so that they can have a clearer idea and an overall context within which they can expect
to bring changes to the working environment.

This thought-process brings a much-needed change in the approach to work and reflects
on the quality and volume of output. Managers now understand the need to provide their
team members an accurate information about financial reports and results. Without
transparency on these levels, employees start being suspicious which impacts their
performance negatively.

Depending on which department a particular employee is from, he will gauge his own
performance on some important matrices. For someone into the Business Operations
side of an organization, he will have to keep a record of performances based on:

 Sales Data - How much volume has been sold to the market
 Customer loyalty and retention - Customers who value the brands
 Productivity - Volume of output and number of targets met
 Gross Margin - A record of the company's monthly profit and loss
 Overhead - Constant recurring expenses
 Variable Costs - New partners, acquisitions, benefits, medical insurances
 Inventory - The amount of stock the company has
 Hours Worked/Process - Hours the employees producing the output
For someone into Talent Acquisition and HR policy-making, it’s imperative that he
understands the way the people getting recruited influence the working environment of
the company. Most HRs gauge the performances of the employees hired in different
processes on a monthly basis so that they can calculate the performance incentives and
other benefits accordingly. Some of the parameters that form an integral part of HR Metrics
are as follows:

 Headcount - Number of employees

 Turnover - How productive the employees are

 Absences - Paid and unpaid costs to the company

 Employees Trained/Training Hours - Amount of time spent on training employees

and expenses born on the training

 Employee Engagement - Frequent discussion with employees to understand their

view of the company

 Customer Service/Satisfaction - The perception that a company has in public's

mind

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 Business Acumen

 Diversity - Getting people from different backgrounds to the workforce

 Performance Management Scores - Keeping track of necessary parameters to

optimize employee performance

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 9. BUSINESS PROFICIENCY Business Acumen

Some of the most important parameters on which the performance of a company is gauged
are linked to good preemptive measures and foreseeing decisions. A company thrives on
managers who can take timely decisions by asking themselves tough and transparent
questions on whether they are aware of the happenings around the world and what do
these changes mean for them, their competitors, and customers.

They should be able to determine the factors that are needed to get the desired results in
a company sustaining growth and profitability in the longer run. Some of them are:

The volume of products/services that has been purchased from

Sales the company through its various channels and outlets.

The amount of revenue the company generated compared to

Profit the amount that was invested in developing and designing the
product.

The stock of products and cash that a company keeps with to

Inventory face imminent situations like demand or crisis.

Deciding the time to start the launching of a product and the

duration it should be advertised and marketed.
Time to market

Costs to the company under all the various heads.

Expenses
Total number of people in the staff.
Employees hired
the number of employees who were provided the initial "boot-
Employees trained camp" training and the subsequent process-oriented trainings

Payments made out to other training organizations for

Cost of training providing their company's employees training.

Turnover Comparing the volume of output with the amount of

Measures investment.

Predict the future Having a futuristic vision based on current trends and market
studies.

Political decisions More pronounced in capitalist governments, where major

decisions could be taken backed by corporates.

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Changes in
government Policy changes brought in by the new government.

Changes in the Global economies also influence the decisions of a company is

economy a huge way, especially if the company has got a global
presence.

Readiness rate It is measured by the increased percent of employees

successfully completing a job-related training course.

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 10. CULTIVATING BUSINESS ACUMEN Business Acumen

Building a keen sense of business acumen doesn't come in a day. It requires tremendous
observational skills. It needs you to commit time and efforts into the purpose. Keeping
yourself updated is the key to being ready and strategically prepared. Successful
professionals hone their Business Acumen skills by talking to other managers in key
business positions, attending business seminars, and industry meetings. They always stay
proactive and look forward to actively contributing to a plan.

The most important factors for any company to aim for growth are understanding the
demands of the current market, the supply channels, and the economic conditions. Other
factors include Business Statistics, Demographics like population of a place, buying trends,
cost of manufacturing, sales and other logistics.

Critical Thinking to Build Business Acumen

There are times when you have to look at yourself hard in the mirror and ask yourself a
few questions on your performance. Big organizations understand the importance of
employing people who not only try to give their best effort, but also self-reflect when they
don’t get the desired results.

The following activity helps to build and enhance Critical Thinking of the employees in a
company. To complete all the steps, you need access to your company's financial
statements.

For the rest of the details, you could use the following references:

References Information to find here

 Annual Reports, Letters to Shareholders, Quarterly Reports

Company’s website  Earnings-related Materials & Media Releases
 Investor Presentations & Seminars
 Press Releases

 Stock Performance And Comparative Stock Performance

 Stock Metrics (E.G., PE Ratio, Market Capitalization)
finance.yahoo.com  Comparison of Companies
 News Stories
 Financial Statements

Cash
As we now know, cash is the fuel on which the entire business machinery runs. Before
understanding what changes can be brought in which fields, you must have a clear idea

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 Business Acumen

on how the numbers have stood from the past few years till now. The following table will
help you gather a lot of necessary information in that regard.

Fill up this table with the data needed:

(The “Details needed” column will tell you the source of the information)

Metric Details needed This Last 2

Year Year Years
Cash on Hand Balance

Securities Balance

Cash + Securities as % of
Revenues

Cash from Operations Cash Flows

Free Cash Flow= Cash Flows

(Cash from Operations – Capital
Expenditures Cash Flows)

Days Inventory Outstanding Income &

(DIO)= Balance
(Inventory / (Cost of Goods Sold /
365)

Days Sales Outstanding (DSO)= Income &

(Receivables / (Revenues / 365) Balance

Days Payables Outstanding Income &

(DPO)= (Payables / (Cost of Balance
Goods Sold / 365)

Cash Conversion Cycle=

DIO + DSO – DPO

Based on the information collected above, answer the following questions:

1. From the cash perspective, does your company maintain large amounts of cash on
records? How does it deal with projects that involve lesser cash?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

2. How fast does your company utilize its cash to provide the products in demand to its
suppliers and customers? Judging from its cash flow, where it must do well or improve
its performance to sustain the profit in the future?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

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 Business Acumen

3. Identify the recent trends in your company’s Cash metrics.

____________________________________________________________________
____________________________________________________________________
________________________________________________________

4. What does the company share with the public with respect to their cost of capital,
hurdle rate, or return on equity?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

5. Keeping in mind the company’s current cash flow statement, what are its major sources
and uses of cash? How do major cost lines like interest payments influence your
company’s strategy and current challenges?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

6. Compare your company’s performance with its strongest competitor’s performance

with respect to cash.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

7. Keeping in mind the company’s current cash situation, which products and services
according to you, would give it the maximum advantage?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

Profits
It’s important for you to keep a track of how much revenue your company is generating
when compared to the effort, time, and expenses that are being invested into the
production. The following table will give you an accurate description of your company’s
profit.

Fill up this table with the data needed:

(The “Details needed” column will tell you the source of the information)

Metric Details This Last 2 Years

needed Year Year
Gross Profit Margin Income
(Gross Profit / Revenues) x 100

Operating Profit Margin Income

(Operating Profit / Revenues) x 100

Net Profit Margin Income

(Net Profit / Revenues) x 100

Profit Margin Income

Diluted Earnings Per Share Income

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 Business Acumen

Operating Ratio
(SG&A / Total Revenues) x 100 Income

Benefit Ratio (Payers)

(Benefits Paid / Premiums) x 100 Income

Other Cost (if any) mentioned as

%age of Sales Income

Based on the information collected above, answer the following questions:

1. Are the goods and services provided by your company unique? If so, does it result in
a high margin of profit or low? What elements contribute to the profit margins of your
company?
____________________________________________________________________
____________________________________________________________________
______________________________________________________

2. Identify the trends in the Profit metrics.

____________________________________________________________________
____________________________________________________________________
________________________________________________________

3. What does your company share with the public about its sales, volume, cost
management, and economies of scale?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

4. Identify all major costs and items that impact the profit of your company, after going
through the Income Statement. How do they influence the company’s strategy and
current challenges?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

5. Compare your company’s performance with its strongest competitor’s performance

with respect to profit.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

6. Keeping in mind the company’s current cash situation, which products and services,
according to you would give it the maximum advantage?

____________________________________________________________________
____________________________________________________________________
________________________________________________________

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 Business Acumen

Assets
A strong company will have a considerable investment in assets. Your company’s
investment in its assets will tell you what their growth chart is going to be in the next
couple of years and the direction they are headed.

Fill up this table with the data needed:

(The “Details needed” column will tell you the source of the information)

Metric Details This Last Year 2

needed Year Years

Liquidity – Asset Strength

Current Ratio Balance

(Current Assets / Current
Liabilities)

Equity Ratio Balance

(Total Equity / Total Assets) x 100

Productivity – Asset Utilization

Return on Assets Income &

(Net Income / Total Assets) x 100 Balance

Return on Equity Income &

(Net Income / Total Equity) x 100 Balance

Return on Invested Capital Income &

100* (Net Income – Dividends)/ Balance
(Long-Term Debt + Total Equity)

Based on the information collected above, answer the following questions:

1. From an Assets perspective, what are your company’s key assets? How does your
company get the assets it has and how do they compare to the ones needed to run the
business successfully? What is the liquidity of the company?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

2. Explain how the Assets Metrics of your company are related to the current trends in
Profit and Cash.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

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 Business Acumen

3. What does your company share with the public about its strategies around asset
management, concentration, out-sourcing, and innovation?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

4. What are your company’s major line items impacting asset strength and utilization. Go
through the company’s balance sheet and understand what its strategy and current
challenges are?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

5. Compare your company’s performance with its strongest competitor company’s

performance with respect to assets.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

6. How will your conversations or pitches about your company differ after this knowledge
and what products and services would you like to offer them based on these answers?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

Growth
A stagnant company is a lost company. A company should always look to grow in the
future as new competitors will always keep arriving at the scene to eat into the proverbial
pie. In addition to that, customer preferences will keep changing. Also, a start-up company
may cut profits with lesser assets and costs.

Fill up this table with the data needed

(The “Details needed” column will tell you the source of the information)
Metric Details This Last 2 Years
needed Year Year
Top Line (Revenues)
([This Year / Last Year] - 1) x 100 Income

Bottom Line (Net Profit)

([This Year / Last Year] - 1) x 100 Income

EPS (Diluted Earnings per Share)

([This Year / Last Year] - 1) x 100 Income

Other Key Metric:

([This Year / Last Year] - 1) x 100

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 Business Acumen

Based on the information collected above, answer the following questions:

1. Is your company growing? Is it taking a market share from other companies dealing
with the same products and services? Is it investing in newer markets?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

2. Explain the risks factors of your company and what external factors like regulation,
exchange rates, tariff rates, stock market fluctuations, etc., is the company most
susceptible to?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

3. Identify and explain any trends in the Growth metrics.

____________________________________________________________________
____________________________________________________________________
________________________________________________________

4. Review the company’s stock price performance over the past five years. Find any
context you can to major moves upward or downward in the stock. What made
investors buy or sell the stock at that time?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

5. What do the company’s executives say publicly about their strategies around Growth?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

6. Consider the same questions with regard to any interim period since the company’s
most recent fiscal year end.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

7. Compare the company’s performance and priorities with respect to Growth with those
of one or more key comparison companies.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

8. Identify your impact – how will the above impact your conversations or pitches with
this company? What products or services would you offer them based on these
answers?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

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 Business Acumen

People
A business always depends on a market that will need or want its products. Without a loyal
customer base, no business will manage to sustain its initial success. Therefore, it’s always
advisable to study the changing buying patterns and trends of the customer.

The following questions will give you an accurate assessment of your company’s customer
acceptance:

1. Describe this company generally from a People perspective. Who are its key people?
How does it measure success with them, and why does it choose these metrics in
particular?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

2. Identify and relate the people’s trends to Profit, Cash, and Assets.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

3. What do the company’s executives say publicly about returning capital to shareholders,
innovation, reliability, efficiency, regulatory compliance, profitability?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

4. Compare the company’s performance and priorities with respect its competitor
companies.
____________________________________________________________________
____________________________________________________________________
________________________________________________________

5. How will the information obtained through this analysis impact your conversations or
pitches with this company?
____________________________________________________________________
____________________________________________________________________
________________________________________________________

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 11. THE BIG PICTURE Business Acumen

When the Westervelt Company decided to divest itself of its privately held business of
paper & grocery bags manufacturing and paperboard packaging to move into other areas
of business such as real estate and sporting lodges, many employees were found
dissatisfied with the way things were handled in their company.

Used to a relaxed approach towards their work, the employees were now asked to adjust
to a highly competitive corporate environment that needed different strategies and
different measures. As a result of this, there was an increasing sense of frustration at the
employee level primarily because of the fact that the company had "sold out" to make
greater profits, putting their working style and family life into a disagreeable change.

In order to win the employees' trust and support back, the company decided to give the
employees a foundation of Business Acumen. The management implemented a
simulation board game which gave the employees and managers a chance to
understand how running a business could be extremely tough and getting a steady profit
all the time is in itself a very difficult process.

Through the game, the employees learned the details of the company's products,
processes, pricing, and profit margins. It gave them a chance to see how all these numbers
added up to the financial success of their company. The managers and employees finally
realized that it's very tough to generate revenue and make sustainable profits in the long
run.

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