from Mihir A. Desai
How Finance Works by Mihir A. Desai is the Harvard Business Review guide to financial thinking: how to read financial statements, understand valuation, capital structure, and risk, written for non-finance managers and leaders.
“Financial literacy is not a luxury for specialists. It is the language in which business decisions are made, and not speaking it means operating blind.” — Mihir A. Desai
BOOK SUMMARY
Mihir Desai, professor of finance at Harvard Business School and Harvard Law School, wrote this book with a clear premise: business leaders need to understand finance, but most books on the subject are written for specialists. The result is a guide that makes financial thinking accessible without oversimplifying it. The book covers the three great pillars of corporate finance: how to read and analyze financial statements, how companies are valued, and how decisions about capital structure and risk management are made.
What distinguishes this book is its interactive format inspired by Harvard’s case method. Desai does not present isolated formulas but real situations where the reader must apply financial reasoning to make decisions. From analyzing why Apple maintains enormous cash reserves to understanding how Netflix finances its growth with debt, each chapter connects theory with concrete business decisions.
The book also covers topics such as the time value of money, cost of capital, valuation multiples, financial leverage, and risk management. Everything is presented with the clarity that characterizes the best Harvard Business Review publications, with charts, practical examples, and reflection questions that consolidate learning.
WHY I RECOMMEND READING THIS BOOK? By Francisco Santolo
Most entrepreneurs and leaders have a weak relationship with finance. They know it is important, but they delegate it, avoid it, or reduce it to basic cash control. This Harvard Business Review book makes financial thinking accessible without losing rigor. At Scalabl® we insist that understanding how finance works is not optional for anyone running a business: it is the language of business decisions. You cannot scale what you cannot measure, and you cannot measure what you do not understand financially.
What I value most about Desai is that he does not treat finance as an isolated technical exercise but as a tool for strategic thinking. Every financial concept he presents is linked to a real business decision: when to take on debt, how to value an acquisition, what a company’s margins truly reveal about its competitive position. For any leader who wants to make informed decisions and engage as equals with investors, banks, or financial partners, this book is an investment that pays for itself.
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