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6.3Accounting & finance
Covers reading the financial statements (BS/PL/CF), the break-even point measuring viability from fixed cost and variable-cost ratio, ROE/ROA measuring capital efficiency, and the gap between profit and cash (depreciation, insolvency-while-profitable), so an IT strategist can wield them when judging the viability of an investment or the profitability of a solution. The key is being able to compute the numbers and decide whether to invest.
An IT strategist's proposal ultimately cannot pass unless it can be explained to management in the language of finance—viability (will it make money) and funds (will cash flow). This section, after grounding the roles of the balance sheet (BS) showing financial position, the profit-and-loss statement (PL) showing a period's earnings, and the cash-flow statement (CF) showing changes in cash, covers—through settings where you actually compute the numbers to decide whether to invest—the break-even point that finds "how much must be sold to be in the black" from fixed cost and variable-cost ratio, ROE/ROA showing profit efficiency against equity and total assets, and the mechanism by which accounting profit and cash on hand diverge (depreciation is a non-cash expense; a firm can go insolvent while profitable).
6.3.1Break-even point and marginal profit
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