13. Qué afecta y qué no afecta al Balance
Recap of the First Year in Business
Overview of Initial Investment and Profit
- The company was founded with an initial investment of 300 million for organic food production and distribution. After one year, a profit of 20 million has been achieved.
Key Financial Variables
- Three key variables are identified for assessing business health:
- Positive and sufficient profit.
- Positive cash flow (tesorería).
- Adequate returns on investments.
Understanding "Sufficient Profit"
- The concept of "sufficient profit" is explored, emphasizing that it depends on how profits are utilized:
- Dividends can be distributed to shareholders.
Options for Utilizing Profits
- If profits are not distributed as dividends, they can be:
- Reinvested into acquiring more assets (both current and non-current).
- Used to pay off debts.
Assessing Profit Sufficiency
- Companies must evaluate:
- Desired dividends by shareholders.
- Necessary reinvestments for competitiveness.
- Amount of debt that needs repayment within the fiscal year.
Impact of Debt Repayment on Financial Statements
Short-term Debt Considerations
- It is noted that short-term debt repayment (50 million) should be prioritized from the annual profit.
Distinction Between Cash Flow and Income Statement
- The income statement reflects revenues minus expenses but does not account for cash flows such as loan repayments.
Loan Repayment Insights
- Loan repayments do not appear as expenses in the income statement; only interest payments are recorded. This distinction is crucial for understanding financial health.
Effects on Cash Flow and Balance Sheet
- While loan repayments do not affect the income statement, they impact cash flow significantly, reducing available cash while also decreasing total debt on the balance sheet.
Importance of Understanding Financial Statements