By Edward Fields
Procter Thomson was one of the best teachers I ever had as an undergraduate. One of “Thomson’s laws” was: “Good teaching is the art of making the difficult simple.” Authors and teachers should both keep that in mind as they attempt to instruct.
“The Essentials of Finance and Accounting for Nonfinancial Managers” is a book that confuses simple with simplistic. That is unfortunate, because there is a real need for a book that can turn the arcane jargon of finance and accounting into a useful whole for the non-financial manager. This book supplies the jargon. It fails to unify that jargon into a useful whole, in this reviewer’s opinion.
One problem with this book is that it walks a line between “almost right” information—presumably “dumbed down” to meet the perceived needs of its target audience—and information that is questionable. Oftentimes the information is unnecessarily detailed.
The book takes the reader through each of the major financial statements—the Balance Sheet, the Income Statement, and the Statement of Cash Flows—by example. That is useful, but for a reader with little financial knowledge it may be a confusing way to learn because basic understanding does not always come from a single example.
From there, the author continues with a good section on ratio analysis and attempts to cover much of managerial accounting in a few pages. He is to be congratulated for his attempt.
The author’s attempt at teaching finance—particularly present value and internal rate of return—falls quite short of what is possible. A detailed example of a realistic project analyzed using payback, internal rate of return, and net present value, would be very helpful in this section of the book. The simplistic example provided does little to provide the user of the book an idea of the richness of finance in making business decisions, and the section on risk adjustment is simplistic.
Like many others before it, this book contains a very good glossary listing financial terms.
This book would best be utilized in a course on Finance for the Non-Financial Manager. In that context, I am certain that it would be a valuable reference. However, as a stand-alone book, I believe that it lacks clarity and will leave many of its readers with a sense that they have a vague understanding of what they have read. Many will feel that they have drunk from a fire hose and, in my view, they will be correct in that feeling.