Many scientists and engineers I’ve worked with have expressed frustration at not being able to have the kind of influence they want over the strategic directions of the companies in which they work. Oftentimes they feel their perspectives are being dismissed, particularly in discussions with colleagues in other functions.

But in the wise words of a mentor of mine, ‘if you want business people to listen to you, you have to be able to speak in a language they will understand.’ That language is, by and large, the language of finance. If you can frame the opportunities you see in language that your non-scientific colleagues can easily understand (and then explain to the board of directors), your ideas are much more likely to gain traction.

Similarly, scientific leaders will be better equipped to identify and prioritize scientific programs and investments if they can connect the dots between technical advancements and the ever-important bottom line (which, it turns out, refers to an actual line in the income statement!).

So my hope is that when armed with a little better financial intelligence, scientists and engineers can start to bridge the gap between the technical aspects of our business and the business end of the business.

Of course, I myself am one of these scientists. And so a big part of why I am writing this series is to force myself to dig deeper into some of the learnings I have gleaned from books, podcasts, and articles along the way (including frantically looking up terms like GAAP and EBIDTA during earnings calls and executive meetings). By virtue of my scientific background, hopefully the language I use throughout this series will be a little less opaque and a little more understandable for those of us who are more likely to be reading Nature articles than the Economist.

Specifically, in this mini-series, we will cover:

  • Some basics on financial statements
  • The big three financial statements (and their component parts):
    • the income statement
    • the balance sheet
    • the cash flow statement
  • Key ratios or evaluating the financial health of a business
  • Numbers investors care about and why
  • How to understand whether a new project/investment has (financial) merit through Net Present Value

Finance for Scientists

A dollar sign with a pipette

More in this series

  1. Why am I writing about finance?
  2. How to learn the financial basics about a new (to you) business
  3. Every scientist’s dream: Understanding financial statements
  4. A first look at income statements: revenue, costs and profits
  5. What scientists need to understand about revenue and its recognition
  6. Income Statement Fun: What is included in the Cost of Sales and why you should care
  7. How expenses and depreciation can affect the profitability of your scientific work
  8. Profitability: the proverbial and literal bottom line
  9. Using the Balance Sheet to Understand a Company’s Financial Health
  10. Assets: tangible, intangible, and goodwill
  11. Decoding Financial Health with Liabilities & Equity from the Balance Sheet
  12. Navigating a company’s financial condition with the cash flow statement
  13. The Anatomy of a Cash Flow Statement: Operating, Investing, and Financing
  14. Budgeting 101: Using our newly acquired financial intelligence to make sense of the budgeting process
  15. Making Sense of the Numbers Through Financial Ratios
  16. Your Company’s Quarterly Earnings Call: How to Make Sense of It All
  17. The “Big Five” Numbers — What Investors Care About and Why
  18. Net Present Value: Making the Financial Case for Advancing Scientific Projects You Care About

To start, a couple references and an important acknowledgement. My initial foray into the wonderful world of finance was inspired by my friend Jeff Krimmel’s frequent LinkedIn posts on business and strategy in the energy sector. Jeff and I met as PhD students at Caltech, and I have been awed by his seamless transition from hardcore engineering to business and strategy, and am always impressed by his insightful discourse. I highly recommend checking out Jeff on LinkedIn and perusing his mini-course on Energy Finance. You’ll notice that this course closely mimics his course in places (with his blessing).

Another important source here is the book, Financial Intelligence. A Manager’s Guide to Knowing What the Numbers Really Mean, by Karen Berman and Joe Knight. It’s a great read and has many details that I won’t cover in this series.

In any case, I hope you enjoy! I would love to hear your questions, thoughts, and comments along the journey. And if you are really keen, join my mailing list so you don’t miss the future installments of this series.