Book Review: Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean

This book is written by Karen Berman and Joe Knight. They are the owners of Business Literacy Institute, a consulting firm which specializes on financial literacy programmes. As the title suggests, this book is intended for managers. But I find it to be quite helpful to investors too.


Layout of Financial Intelligence

This book is divided into eight parts. Each part ends with a toolbox which elucidates some important concepts or teaches us how we can apply what we have just learned.

The first part, “The Art of Finance (and Why Does It Matters)”, contains three chapters. These chapters talk about the needs for financial intelligence.

Second part is “The (Many) Peculiarities of the Income Statement” with five chapters. In this part, we will see how the figures in income statement are derived.

“The Balance Sheet Reveals the Most” constitutes the third part of the book. From these five chapters, we can learn more about the balance sheet and its relationship with the income statement.

The next part is “Cash Is King” which has five chapters. The authors explain on the importance of cash and teach the way to read cash flow statement.

“Ratios: Learning What the Numbers Are Really Telling You” consists of five chapters. In this part, the authors talk about the different kinds of ratio that can help us to evaluate the financial health of a company.

Part six is “How to Calculate (and Really Understand) Return on Investment”. There are only two chapters in this part. As the name suggests, these chapters are all about return on investment.

“Applied Financial Intelligence: Working Capital Management” is the seventh part and contains three chapters. This part talks about the importance of working capital and how it can be managed.

The final part is “Creating a Financially Intelligent Department (and Organization)”. A total of three chapters constitutes this part. They show the strategies to improve financial literacy and its benefits to the corporate.


Lessons learned

According to the book, financial intelligence boils down to four skill sets: understanding the foundation, understanding the art, understanding analysis and understanding the big picture.

My primary lesson is that the figures in the financial statements are full of assumptions, estimates and biases. The stated figures can change significantly, depending on what assumptions are used by the accountants.

This book is really technical but the authors go to great length to ensure that the readers can understand the content of their book. Each important term is explained in a simple and understandable way. They explain on the income statement, balance sheet and cash flow statement and how a manager or worker’s action can impact the financial health of the company.



This is not really an investment book but I think it will improve our knowledge in reading the financial statements. Though technically it is meant for managers, it provides a guide to how a worker can evaluate and help to improve the financial health of his or her company. By having this knowledge, we as investors can try to identify measures that can change a company’s fortune for better or worse. Furthermore, we can know that whether the improvement in earnings is real or just some accounting manoeuvre.

Let me end with some memorable quotes from the book:

“Finance and accounting are an art as well as a science.”

“There’s a simple antidote to politics: sunlight, transparency, and open communication.”


Recommended book

If you are interested in Financial Intelligence, you may get the book from Kinokuniya Malaysia through the link below*.

*Disclosure: The above link is Involve Asia affiliate link. Thus, I may earn a small commission when you purchase the book through this link.

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