02 July 2012 12:56pm
I found a way to represent all accounting data (over any period of time) of a company in one graph/picture. I don't think it's anything new, it's just the method is different from what I've seen before. The advantages are that:
- you have it all in one place and you can see the interconnections between anything that interests you (eg. profit related to assets, or cash)
- if you have a ruler, a calculator, and know a bit of geometry you can derive out of the graph anything; from individual expenses of the business to asset turnover, ROI and all the financial statements.
- it only takes 5-10 minutes to understand how the graph works and what the lines represent
disadvantage: - you need every transaction (dated) that the firm has to build the graph. Non transparency can yield bad results.
First I did this with the purpose of finding the profit for a business (in a more graphical way), but later when I looked at it I realized you can do much more with it.
The business for which I did this is rather small, with one owner and no interest in investors or sharing their data too much for that matter, so for them this has just a little managerial usage. I assume this would be more useful for external users.
Do you think there would be demand for such a graph? would accounting software companies be interested in such a thing?
Thank You in advance.
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