Whilst there is no single way in which a business can be measured and valuations are subjective, we use what is called the ‘capitalisation of earnings’ method basis to provide a valuation guideline.
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Whilst most managers understand the concept of profitability and a little bit about the balance sheet cash flow and in particular the way accountants present it, is very misunderstood.
The ability to measure performance is essential in setting corporate objectives. Such measurement can be used to develop incentives and in order to control operations towards achieving organisational goals.
How the assets within a business are managed will have a bearing on the overall performance of the business.
But because the assets are held in the balance sheet, which is a document poorly understood by most managers, the assets will often not receive the attention they deserve.
Every business needs to be profitable to be successful. The profit of the business is the so-called bottom line and indicates whether the company still has a cash surplus after all costs have been deducted from the revenue it has generated from sales.
In order to ensure positive cash flows, business revenues,or income, must be greater than expenses. Once you revenues fall below a certain level your business will be using cash, not generating cash. This is because a large part of your total expense base consists of what we call fixed costs which are not affected by the level of revenue.
In most cases a business owner will require premises to operate their business from. Unless they are able to purchase the property they will need to find suitable premises and then enter into a lease agreement with the owner of that property.
The simple answer is that as soon as you start your business you are exposing yourself to risks which means you need to take protection. The best way to do that is by obtaining a business insurance policy.
Legislation affects South African businesses is a variety of ways and it is important that you get and remain compliant.
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