2. Supposed basic to study finances

Chapter 2


by: josavere



The digital revolution, an excellent opportunity for those with sufficient skills to take advantage of it, confronts us with a very complex change, forcing traditional companies to reinvent themselves to adapt to the new or disappear.

The most transcendental step corresponds to the human resource to teach them the ability to adapt, to face disruptive changes, thanks to the possibility of exploiting large volumes of information at high speed, a capacity that has developed rapidly in recent years, in terms of learning, decision making, and execution tools.

Organizations must carry out comprehensive planning that covers all areas to be developed in a coordinated manner: identification and access to information sources, methodologies, systematization, and control of correlative risks.

The digital disruption produces a reordering of the world and helps to redistribute wealth, especially with regard to social inclusion, improvement in health, knowledge available to all and taking advantage of clean sources to lower energy prices, respecting Sustainability, attacking the socialism/capitalism dichotomy, promoting transcendental mutations in the political and economic fields; In addition, it facilitates social mobility, improves the quality of life and facilitates the increase in productivity that the world cries out for in order to face the inflation generated by Covid-19. It is necessary to integrate digital technology in all areas of a company, changing the way it operates and adding value, complementing it with a cultural change to interact better.

Knowing oneself to enhance the creative side, because of the ability to generate experiences, provide new points of view; look for different forms of expression and everything that is not likely to be automated to be executed with a robot, is and will continue to be highly appreciated. Cultivate empathy, think about contributing to the quality of life, not making tempting accumulations, seek wisdom and live with a collaborative spirit, working in Holacracy.

Finances constitute a fundamental element of understanding and offering judging elements to facilitate the analytical approach that must be prioritized in the study of these techniques, which are made enormously possible with the use of computers.


Concept explained in financier mathematics, where one assumes that all dollars generated as rent constitute so on in a greater value of the capital and, based on the interest rate and the regularity of liquidation. The effective rate of yield will higher be while the shorter the period is used to pay the interests. Using financial mathematics we can equate an amount to receive in a future determined by that could receive in return an immediate way. The fairness depends on the rate of interest, which is agreed upon between the parties. 


The companies work under the jurisdiction of a country. To the government corresponds to generate the infrastructure and to create the investment climate that requires the businesses; for that reason collects and redistributes 

While they contribute to the companies is more efficient, the government will improve the quality of life of the inhabitants and make the country more attractive for foreign investment, so desired as the capital source. The businessman must consider the government as a special partner and pay for taxes and to analyze the decisions, based on structured affluent calculations. 


While the greater risk the investor must assume, the greater expectation of profit that appears; otherwise, he will look for another horizon. 
As a general principle, all investment implies a risk in a greater or smaller quantity and is very difficult to measure in quantitative terms, in spite of the great advances obtained, and measured by its degree of acceptance in the financial world. In practice, the handling of the risk requires a high dose of criterion combined with the probabilistic models. After the fall of the twin towers in New York (September 11 of 2001) and now with the crisis of the year 2020 caused by the COVID-19 or coronavirus, it is necessary to reevaluate a concept that prevailed for a long time: "zero risks, a US Treasury bond."


This means that the results obtained by the companies must be concentrated in the value of the share in the market and a good possibility of negotiation (stock-exchange); it must be sufficiently attractive so that it generates a demand that allows the shareholder a change of investment when they wish it, (mobility of factors). This is obtained with properly specific information; simple, ample, and transparent certified by an organization that generates credibility. It must be governed by the practice of a good corporative government. 


The benefits are tangible and the companies are attractive if they pay dividends independently of the practice used to do it. Its payment implies taking care of the high-priority obligations that mean: governmental, labors, operation, suppliers, and financial organizations. Even though the cash flow discounted not always is the method correct in the valuation of companies, it constitutes the generalized tool. More important than the sale on credit, is the collection of the portfolio. The sales by cash constitute the ideal in normal conditions. The liquidity with an adequate structure of assets and an efficient administration generates yield which as well provides feedback to the liquidity and so on.


Consequently with the previous assumption, evaluating a projected cash flow; the initial situation must be simulated and the new one (including the income and debts of cash of the project to evaluate) and later settles down the difference between the new cash flow and the initial. If the treasury situation improves the project is viable; otherwise it is rejected.
All the projects are subordinated to the plan of the generation of value of the company and evaluated based on the capital cost (dynamic concept) and the consequences of possible cannibalism in the income are avoided.


Competition is a constant in the world of businesses and sees it increased by the phenomenon of globalization, which makes the situation every day more difficult. 
The excessively profitable businesses are very few; in this event, they last just a short time, because they quickly attract new competitors. It is important to take advantage of the maximum of the competitive advantages that the moment offers, while the new actors come to complicate the business and reduce its yield. It is fundamental to use benchmarking consistent form as a tool of evaluation and continue improvements. 


In many cases, the owners delegate the direction to other people, and not always the interests of the administration are with it. 
Nowadays the human resources are considered to the intellectual capital as the most valuable resource of the companies and to a large extent is constituted by the director's team on which the company does own not have the property 
The salary of risk, expectation that appears, based on the plan of value generation that must be approved by the owners (through the board of directors) constitute an excellent mechanism to make an agreement the interests of the owners and the administrators and to avoid this type of conflicts. 


The finances use as a basic tool, accounting, which is not governed by universal accounting principles. For benchmarking effects the pertinent adjustments are required to make the financial statements comparable. The world needs to legislate on that matter before the phenomenon of globalization settles in thus facilitating the analysis of investments. The measurement of all possible things; analyze financial statements using resort to a UNIQUE PLAN OF ACCOUNTS and the sector analysis.


The concept of the highest manages responsibility for the board of directors is the handling of the long term. It implies a high dose of responsibility; not to show apparent profits in the short term, sacrificing the future growth, and the predominant generation of value with liquidity, elements to value a company. 

The cash flow generated must allow sufficient appropriations to finance the positioning; the qualification of the human resource; investment in investigation and development; the preservation of the environment and the certifications of quality. Decisions like the modernization of the equipment, the preventive maintenance, accelerated depreciation especially when one works with advanced technology, the sufficient retention of profits to withstand the inflation and to finance the growth; the care of the principle of financial conformity, constitutes a very representative example that illustrates the balance between the handling of the short and the long term.


The risk is inherent to the businesses that operate in different countries. The risk country, in general, is equal for all the companies and therefore, in principle is not diversifiable. Nevertheless, its dispersion with operation in other countries can be obtained. The risk of the business is diversified with operation in another type of activity, based on correlation analysis and at first a universal saying in finances: “don’t place all eggs in the same basket”. 


Ethics relates to everything that has to do with morality, which means doing the right thing and being governed by the canons of good corporate governance. The difficult thing about the matter is to define “the correct thing” because it depends on the values ​​of the people, the societies, and the times, which, in the end, are codified in the laws of each country.

In January / 2020, the Davos Forum, talking about CONSCIOUS CAPITALISM, defined the purpose of a company from the fourth industrial revolution: "to involve all stakeholders in the generation of shared and sustained value, including local communities and society."
Ethical behavior instills trust, which is a pillar in 21st-century companies and especially in virtual ones. It also implies social responsibility, framed in the wise phrase "who does not live to serve, does not serve to live." Due to the subjective and complex nature of the subject, I summarize it in a phrase that I learned from Eastern culture: "always decide while seeking inner peace."

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