The Core : Profitability - Liquidity - Stability

Entrepreneurs, analysts and supervisory members are asking:

  • Is enough ordinary profit being generated to reward labour and capital?
  • Is there enough cash available throughout the year?
  • How stable is the existence basis, as evidenced by adjusted equity growth?

The company may appear to be profitable, but lack liquidity. Other questions:

  • What about costs and benefits?
  • What about decision-making ?
  • What about short-term financial planning?
  • What about medium-term operational planning?

The following diagram illustrates the topics covered in business management.

Here is diagram which is close to the workflow of Business Management.

In this diagram, the horizontal arrows at the top indicate the 'direct method' for determining 'cash flow 3'. This can be tracked throughout the year.

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

Instructors should provide an overview similar to this diagrams in their first few lessons. The reason: Many of the students drop out 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
‘Business Management - Basics, Indicators, Examples’

Accountants have a different mindset than entrepreneurs.

Accountants record facts. Analysts and entrepreneurs interpret them.

Business Management should provide entrepreneurs and supervisory boards simple, logically derived indicators that make the economic condition of a business transparent.

After all, a business management education should begin with economic thinking. Fortunately, the same principles apply to companies of any size. Do not confuse income statement and cash flow statement with business management terms. This challenge must be addressed pedagogically, and this is a task for AI-assistants, too.