article thumbnail

How to Improve Your Finance Skills (Even If You Hate Numbers)

Harvard Business Review

If you’re not a numbers person, finance is daunting. After all, if you’re trying to sell a product or strategy, you need to be able to demonstrate that it is both practical and high margin. Stop avoiding finance because you’re afraid of numbers. “Finance and accounting are very simple. .”

article thumbnail

A Refresher on Internal Rate of Return

Harvard Business Review

You’ve got a great idea for a new product that will increase revenue or a new system that will cut the company’s costs. According to Knight, it’s commonly used by financial analysts in conjunction with net present value, or NPV. Finance & Accounting Article. Further Reading. How do companies use it?

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

Will You Be Writing Off Your Investment in Egypt?

Harvard Business Review

Anyone who has had to make the argument for an investment knows the basic tool involved: a Net Present Value (NPV) calculation. The overall value of a foreign investment is equal to the NPV of the expected stream of profits for the life of the investment. If the owner of that subsidiary discounts profits in Egypt by 12.5

NPV 13
article thumbnail

Old Buildings Are U.S. Cities’ Biggest Sustainability Challenge

Harvard Business Review

Today large commercial buildings address only two percent per year of the NPV-positive investments in efficiency that are available to them. This is especially true in the commercial buildings market, specifically large commercial buildings, where well over 75 percent of existing buildings will still be in use in fifteen years’ time.

NPV 8
article thumbnail

Hospital Budget Systems Are Holding Back Innovation

Harvard Business Review

While this might seem like a radical step for hospitals, it is exactly the transition that occurred 100 years ago in the business world in general when companies shifted from a departmental or functional structure to a decentralized, business-unit structure that that was more aligned with and accountable for its products, services, and customers.

article thumbnail

Stop Focusing on Profitability and Go for Growth

Harvard Business Review

So, in real terms, debt financing is essentially free. Next time you're deciding about a big investment, NPV can help you make a more informed decision. The assets that are truly scarce at most companies are the skills and capabilities required to turn great growth ideas into successful new products, services, and businesses.

ROE 14