Why was this page written?

Everyone involved in the world of economics should have a good understanding of what is at its core. These are profitability, liquidity and stability. Some of the fields around them are shown in this diagram.

Some students are introduced to economics early on in school, while others are not until later, perhaps because they go on to become politicians or are elected to the board of supervisors of a large company. All of them need to understand the fundamentals of business management. Instructors should therefore provide an overview similar to the diagram below right from the very first class. A large proportion of students leave their business management course after a few months. Yet even those students must already have learned that profitability, liquidity and stability are the three most important concepts in business management!

Regarding liquidity, the horizontal arrows at the top of the diagram indicate the 'direct method' for determining 'cash flows from operating activities', which can be tracked throughout the year.

Once the annual financial statements have been finalised, the 'indirect method' via ordinary profit can also be employed.