Notes from Book: Romancing the Balance Sheet

I conduct Financial Literacy course for my company colleagues. Hence I started to read this book to pick up few ideas to include in my course. Following are my notes from that perspective:

• Two Rules of Good Financial Management
1. Never invest your money without ensuring that the assets you acquire can generate a return which is at least equal to the cost of your capital.
2. Invest your money in such a way that the assets will generate an inflow of funds before the liabilities demand an outflow.
• Lessons from Rule No. 2
• Long-term funds should be used for long-term purposes and short-term funds for short-term purposes.
• Healthy organizations may use, or should use, some long term funds for short-term purposes.
• But no organization should EVER use short-term funds for long-term purposes.
• Healthy organizations must maintain a current ratio of about 2:1 and a quick ratio of a minimum of 1:1.