What are the basics that people need to understand?
People need to understand the content and linkages in the key financial statements and how to interpret them to measure financial health and performance. The three key financial statements are: the profit and loss account or income statement as it is sometimes called, the balance sheet, and the cash flow. We also need to know about the characteristics of cost at the product level and how to interpret them. Companies don’t make profit – it is products that make profit. So what does a product cost? If you don’t know that, you’ve no idea where your profits are coming from. Another critical requirement is – what is profit and what is cash, and what is the vital difference between the two? A lot of people mistakenly think that profit is all-important, and don’t realise that cash is king. At the end of the day what keeps you alive is cash and cash flow. That’s why we need to understand how to plan both profit and cash, and control and manage them. Additionally, people should understand how t
