Financing and marketing management (1+1)

Unit 6 - Basic Accounting Procedures or Analysis of Business Performance

6.1. Basic Accounting Procedures or Analysis of Business Performance
In order to manage a business effectively from the financial perspective, it is always important to measure:

• Asset structure of the business
• Profitability of the business How much profit is being generated
• Analysis of cash flows When the cash is coming in, and
• How it is being spent.

Accounting is nothing more than the measurement of these processes to reflect what has happened to a business over a relevant period of time. The asset structure (solvency of business) is measured by the Balance Sheet, whilst the profit and cash pieces are measured by the Income Statement / Profit and Loss Account (liquidity of business) and the Cash Flow Statement respectively.