Chapter 15 Key Figures and SSUF

This chapter points to being able to meet payment obligations in the relatively short term (liquidity) and in the relatively long term (solvency). Knowing the real money flows in and out (SSUF overview). And using the financial leverage factor in order to ensure satisfactory profitability at acceptable risks. Remember, almost everything you do and decide has financial consequences for your organization.

Learning Content Chapter 15

Key Figures. The concepts of liquidity, profitability and solvency. It is mainly about explaining profitability or in other words about yield calculations and clearly mapping out all incoming and outgoing money flows.

The only real SSUF shows everything. In detail. Every cent, in and out. Easy to set up, not by starting from the bottom line – but from the top of the profit and loss account. Not the profit plus the depreciations, with which so many theory books start, because then a lot disappears outside the field of view. Add the invoiced turnover (top of the profit and loss account) to what the debtors (see previous balance sheet) were. Suppose that no debtor has paid even one cent, the debtors must now be the total sum. However, the debtors are (see current balance sheet) what they are. Subtract that from the sum and the difference is the payments apparently received on the part of the debtors; if necessary, debits can still be settled on non-paying debtors. Idem, all those other items. Look what it was. Suppose there is not a penny moving. What should it be now? And it is? Ergo, the actual cash flow must be the difference, apart from complications.

The direct method provides a summary of the cash and giro book: the real money flows. The indirect method is mainly limited to changes in balance sheet items. It is not about these mutations but about their causes! The indirect method puts itself out of the game and does absolutely nothing. So it cannot hurt. No wonder that almost all companies use this indirect method in their published financial statements. This sometimes has to be done according to the applicable reporting rules! However, there is nothing to prevent the company from using the direct method in the explanatory notes as extra, if one really wants to show the cash flows.

The profitability or the yield is also a key figure, with the PROFIT in the numerator and the CAPITAL in the denominator. The Total Capital (TC) is divided into Equity Capital (EC) and Loan Capital (LC). It can be all three in the denominator. And the numerator can be the total result before interest on LC and before tax, related to the TC gives YTC (the Yield on TC). YTC is the responsibility of managers in the sphere of OPERATING. Then it becomes a matter of FINANCING with the concern for debt / equity mix and debt rating. What exactly is in the numerator and what is in the denominator? Is it a useful profitability indicator? Literature and practice are teeming with this type of key figures.

This book harshly criticizes out-of-date Business Economics textbooks.

The Profit Formula® i.e. The Way to Easy Profit Measurement (EXACTLY, QUICKLY and EASILY) is 1 of 8 ‘Scientific Perfections’ completely explained in ‘Business Economics VI Groundbreaking’. Schools / Universities ignoring this book, they train students totally wrong in Business Economics.

A self-study book, hardly needing a teacher. Necessary also for many managers in companies to improve their own performance.

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