If you don’t know what “free cash flow” means, maybe you should – if you want to get ahead in your organization.
What if someone told you he had a key piece of knowledge that would give you an edge on most of the other managers in your company? You’d probably jump at it, right?
Well, consider that business owners and CEOs routinely expect their managers and supervisors to have an understanding of the basics of business, especially money and finances. A survey by the Harvard Business Review shows that owners’ expectation might be too high.
Asked to take a basic financial-literacy exam, a representative sample of 300 managers — from all company sectors, including HR — scored an average of only 38%. Get this: Over half didn’t know the difference between “profit” and “cash.” Many didn’t know the difference between an income statement and a balance sheet. Nearly two-thirds thought that discounts offered by sales reps had no effect on gross margin.
Does it matter? When delivering the results of the test, Harvard presented scenarios in which that lack of knowledge could cripple a business. For instance, imagine you’re hiring an inventory manager who doesn’t understand the relationship between inventory on hand and cash flow. Worse, imagine you don’t know what the applicant doesn’t know.
What if someone told you he had a key piece of knowledge that would give you an edge on most of the other managers in your company? You’d probably jump at it, right?
Well, consider that business owners and CEOs routinely expect their managers and supervisors to have an understanding of the basics of business, especially money and finances. A survey by the Harvard Business Review shows that owners’ expectation might be too high.
Asked to take a basic financial-literacy exam, a representative sample of 300 managers — from all company sectors, including HR — scored an average of only 38%. Get this: Over half didn’t know the difference between “profit” and “cash.” Many didn’t know the difference between an income statement and a balance sheet. Nearly two-thirds thought that discounts offered by sales reps had no effect on gross margin.
Does it matter? When delivering the results of the test, Harvard presented scenarios in which that lack of knowledge could cripple a business. For instance, imagine you’re hiring an inventory manager who doesn’t understand the relationship between inventory on hand and cash flow. Worse, imagine you don’t know what the applicant doesn’t know.
