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A simple representation of the operating success

How can I recognize and assess the economic success of a business in the simplest possible and clear way? This is a fundamental question of this course, not only for every entrepreneur, but also for all those who are associated with a business in any way, and also for those who study 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 statements, for newcomers often just a confusing number salad. But a complete picture of the operational situation can only be obtained by combining several calculations, for example the profit and loss account with a gradual contribution margin calculation and then a cash flow statement. In addition, the distinction between fixed and variable costs from cost accounting is of fundamental importance.

The terms mentioned here are first made understandable and explained in their logic. The named computations are compiled in such a way that an operation can be calculated by means of a DIN A4 sheet. This simplified calculation looks like this:

Turnover gross
- Value added tax
-------------------------------------------------- -
= Net sales
- Variable costs
= Contribution margin-1 / gross profit
- Fixed costs (if necessary, gradual allocation)
= Operating result
- Extraordinary result
= Profit (before taxes)
-------------------------------------------------- -

- Taxes on the profit
= Taxed profit (net)
+ Depreciation
= Cash flow I
+/- borrowings / redemptions
- Investments
= Free Cash Flow

Entrepreneurs, tax consultants and management consultants live with this list. It is difficult to understand that this system is hardly taught at universities and almost never in commercial training. It is due to various reasons: The cash flow bill is still not familiar to many accountants because of the legislature is not required.
It has only been part of the international financial statements for large companies since 2007.

On the other hand, the cost split into fixed and variable costs does not come from the accounting, but from the cost accounting. But only this distinction allows an analysis of cost structures and, based on that, effective controlling. This is the consistent continuation of the operational success determination. Here, planned figures are created, which can be checked by means of deviations and, as a consequence, enable subsequent taxation.