The Core : Profitability - Liquidity - Stability

This diagram shows them at the centre of many other areas of business management.

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

Once the annual financial statements for a given year have been finalised, the 'indirect method' via ordinary profit (or profit) can also be used.

Instructors should provide an overview similar to the diagram in their first few lessons. The reason behind: Many of the students drop out of their business management course after a few weeks. Nevertheless, some of them become politicians, while others find themselves suddenly elected to the supervisory board of a large company or group. Even those with limited business management knowledge should be aware that profitability, liquidity and stability are three of the most important economic concepts.

For « Important pairs of terms » see the relevant section in the file
‘i Business Management - Basics, Indicators, Examples.pdf’

Accountants have a different mindset than entrepreneurs.

Accountants record facts. Analysts interpret them.

The entrepreneurs are asking :

• Is enough ordinary profit generated to reward labour and capital ?
  Is enough cash available throughout the year ?
  How stable is the existence basis, shown by adjusted equity growth ?
  What about costs and benefits ?
  What about planning ?

In large companies or groups, the supervisory board is tasked with identifying concepts that will provide the necessary response. Thus, their attention should be similar to that of entrepreneurs.