How can I recognize and assess the economic success of a company in the simplest and clearest possible way? This is a fundamental question of this course, not only for every entrepreneur, but also for everyone who is connected to a business in any way and also for everyone who learns business administration.
Actually, the annual accounts from the bookkeeping or the monthly or quarterly "business evaluations" of a company should provide an overview. For experts, these are important lists, for newbies often just a confusing salad of numbers. But you only get a complete picture of the operational situation if you combine several calculations, for example the profit and loss account with a step-by-step contribution margin calculation and then a cash flow statement. The distinction between fixed and variable costs from cost accounting is also of fundamental importance.
The terms mentioned here are first made understandable and explained in their logic. The named arithmetic operations are compiled in such a way that an establishment can be calculated on a DIN A4 sheet. This simplified calculation looks like this:
Gross sales - VAT -------------------------------------------------- - = Net sales - Variable costs = Contribution margin 1 / gross profit - Fixed costs (step-by-step billing if necessary) = Operating result - Extraordinary result = Profit (before taxes) -------------------------------------------------- -
- taxes on profit = Taxed profit (net) + Depreciation = Cash flow I +/- borrowing / repayments - / + investments / divestments = Free cash flow
Entrepreneurs, tax consultants and business consultants live with this list. The only difficult thing to understand is that this system is hardly taught at universities and hardly at all in commercial training. There are several reasons for this: To date, many accountants are not familiar with the cash flow calculation because it is not required by law. It has only been part of the international financial statements for large companies since 2007.
On the other hand, the splitting of costs into fixed and variable costs does not come from accounting, but from cost accounting. But only this distinction allows an analysis of the cost structures and, based on this, effective controlling. This is the consistent continuation of the operational success determination. Planned figures are created here, which can be checked by means of deviations and, as a consequence, enable readjustments.
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