What is financial intelligence?(Part 1)
One of the problems that people face in life is financial issues. Poor people have a problem with not having money and are looking for a way to increase their income, and on the other hand, rich people need to plan to maintain and increase their wealth.
The part of human intelligence that is used to solve financial problems is called financial intelligence. In fact, the set of senses that helps you to identify financial opportunities and situations around you and use them to create ideas to solve your financial problem is called financial intelligence.
In today's world of modern, competitive business, economic success is crucial for companies. This financial success can be achieved through financial discipline, goal setting and periodic reviews.
Companies that have been financially successful are likely to find that trust in employees is on the rise. Profits have improved and staff reductions have decreased. These three factors contribute a lot to the stability of the company, which in turn is the cradle of growth.
Financial intelligence is a combination of art as well as science. Financial intelligence talks about empowering employees with basic financial knowledge so they can make the right business decision. Financial intelligence, along with financial genius, is a set of skills that every senior manager needs to have.
Financial intelligence usually refers to the ability of managers and employees to understand and apply accounting principles. According to this view, managers and employees who are not formally educated in finance or accounting must understand the basic principles of finance. This is because when they come across accounting information, they can identify the best practices.
B2BCFO summarizes four key features of financial intelligence:
Fundamental: In this case, decision makers need to know how to read the initial financial documents. These include the profit and loss statement, the review of a company's balance sheet and the cash flow statement. All managers need to understand the difference between cash and profits and why the balance sheet is balanced.
Art: One-Part Artistic Intelligence, One-Part Scientific Intelligence, Financial Intelligence means that decision makers have an understanding of the application of assumptions and how these assumptions are concluded.
Analysis: Decision makers can analyze numbers meaningfully. They can calculate profitability, leverage and liquidity, and generally appear successful in stock market behavior.
The advantage of financial intelligence
In his book, Management Performance, Peter Drucker describes the benefits of financial intelligence as follows: If everyone can understand the meaning of the figures as well as the overall goals of the organization, they will act in a way that improves their financial situation.
When it comes to technology, if everyone can use financial performance data effectively, they know how to improve their financial situation and make better business decisions.
The following topics are discussed in this article:
- Get acquainted (gain, obtain) with present-day techniques that came from Financial Intelligence
- Why is financial intelligence important?
- Strategies to increase financial intelligence
Familiarize yourself with the areas that make up financial intelligence
We have already said that financial intelligence is the intelligence that we use to solve financial problems. In fact, we use our financial intelligence when we can combine the information we receive, experience, and knowledge and use it to generate, increase, or develop financial income.
The five areas of financial intelligence are:
Make more money: To compare the financial intelligence of two people, their income is taken into account because a person's higher income will indicate his higher financial intelligence. People have different mental abilities to earn money. A person with more mental capacity may have poorer financial intelligence. How each person uses their abilities to find the right path to earn more, and spend their time and energy on that path, requires an understanding of financial fundamentals. People who are financially intelligent have an understanding of basic financial issues such as income statement, balance sheet and cash statement and know the difference between them.
Money protection: The second aspect of financial intelligence is money protection. Once income is earned, it must be planned to maintain it in order to increase the money.
Money budgeting: Proper budgeting is done when the amount of expenses and income can be predicted and the allocation of income to expenses is done optimally. The measurement of this area of financial intelligence is based on the amount of money that remains after the expenses are paid.
Money Strengthening: This area is measured by the return on investment. That is, how to use the amount of money saved to get more capital. Deposit accounts or the purchase of bonds are some of the ways that can be used to strengthen money, but due to the fact that the bank interest rate in our country is lower than the growth rate of inflation, so the money loses its value.
When a person can have a deeper analysis of financial numbers and ratios and use the available information to improve investment decisions, he has higher financial intelligence.
Improving financial information: Knowing financial concepts alone can not only increase a person's financial intelligence, but accurate and detailed investment information is also part of financial information. Transferring investment to others will prevent you from increasing your financial knowledge. Smart investors know that in addition to numbers, there are other areas that affect the way numbers are interpreted and the type of decisions made. They make a profit.
