Romancing The Balance Sheet Quotes

“A Balance Sheet is a static document.
On the other hand, a Funds-Flow Statement spans a period of time.”
― Anil Lamba, Romancing The Balance Sheet

“Contribution is called Contribution because it is the contribution of each unit sold towards the organization’s bottom line.”
― Anil Lamba, Romancing The Balance Sheet

“It follows, therefore, that the greater the credibility that a firm enjoys, the lower would be its net working capital requirement.”
― Anil Lamba, Romancing The Balance Sheet

“Invest your money in such a way that the assets will generate an inflow of funds before the liabilities demand an outflow.”
― Anil Lamba, Romancing The Balance Sheet

“Never invest your money without ensuring that the assets you acquire can generate a return which is at least equal to the cost of your capital.”
― Anil Lamba, Romancing The Balance Sheet

“Organizations must understand that incomes are sporadic while expenses are continuous.”
― Anil Lamba, Romancing The Balance Sheet

“Successful businesses, therefore, stand on two pillars. Pillar number one: the ability to generate profit. Pillar number two: the ability to effectively manage cash flow.”
― Anil Lamba, Romancing The Balance Sheet

“stock taking is the measurement of what is not consumed”
― Anil Lamba, Romancing The Balance Sheet

“the objective of running a business enterprise to generate profit. But, since profit does not automatically mean money, an equal amount of attention must also be paid to the generation of cash. There is no point in making profit if, at the end of the month, there is no money to pay salaries. Only half the battle has been won when you are able to make profit for your business. The other half will be won if you are also able to generate cash.”
― Anil Lamba, Romancing The Balance Sheet

“Never confuse money with profit!
This is yet another common misconception.
Profit and Money are two entirely different things.
It is certainly possible for a firm to make huge profit and have no money. It is equally possible that it is flush with funds but is suffering losses.”
― Anil Lamba, Romancing The Balance Sheet

“Depreciation, which appears as an expense on the Profit & Loss Account, is the consumed portion of an expenditure.”
― Anil Lamba, Romancing The Balance Sheet

“Remember: nothing should appear as an expense unless it satisfies the test of consumption.”
― Anil Lamba, Romancing The Balance Sheet

“The money received has to be separated into Income and Liability. Money spent must be separated into Expense and Asset. And Income less Expense will give us profit.”
― Anil Lamba, Romancing The Balance Sheet

“Although while speaking and writing many of us use the words expense and expenditure interchangeably, in accounting they have separate meanings. Expenditure refers to spending, or the outflow of money. We have seen that when money is spent, we either incur an expense or we create an asset.
This makes expenditure broader in scope than expense.
Expenditure encompasses both expenses and assets.
If you thought I had made a loss you probably calculated Profit as Income minus Expenditure instead of Income minus Expense!”
― Anil Lamba, Romancing The Balance Sheet

“Money lying in the bank is the most obvious of all non-performing assets.”
― Anil Lamba, Romancing The Balance Sheet

“If we wish to make an annual funds-flow statement, we will need this year’s Balance Sheet as well as the previous year’s Balance Sheet.”
― Anil Lamba, Romancing The Balance Sheet

“Leverage works both ways. If profit increases at a disproportionately fast pace due to a certain increase in sales, profit will also decline at an equally fast pace if sales decrease.”
― Anil Lamba, Romancing The Balance Sheet

“An organization that borrows extensively is called a highly leveraged organization.”
― Anil Lamba, Romancing The Balance Sheet

“However if the fixed costs were higher, the organization’s break-even point would also be achieved later since it would now have to produce and sell more in order to break even.”
― Anil Lamba, Romancing The Balance Sheet

“Everyone involved in running a business must know its contribution margin as a percentage of sales. This, in marginal costing language, is called the PV Ratio or the Profit-Volume Ratio.”
― Anil Lamba, Romancing The Balance Sheet

“I have pointed out earlier in this chapter that if the organization is making profits, for additional sales the profits will increase to the extent of Contribution.
If it is suffering losses, losses will reduce to the extent of Contribution.”
― Anil Lamba, Romancing The Balance Sheet

“As long as Contribution is less than Fixed Cost, businesses make losses.
When Contribution equals Fixed Cost, they break even. And it is when Contribution exceeds Fixed Cost, that businesses make profits.”
― Anil Lamba, Romancing The Balance Sheet

“Sales minus Variable Cost is Contribution, and Contribution minus Fixed Cost is profit.”
― Anil Lamba, Romancing The Balance Sheet

“profit becomes a function of Sales less the sum of Variable Cost and Fixed Cost. If you deduct only the Variable Cost from Sales, what you get is called Contribution. And Contribution less Fixed Cost is equal to Profit.”
― Anil Lamba, Romancing The Balance Sheet

“I must, however, warn you that the strategy of increasing fixed costs to increase profits is only recommended for good times, when markets are booming and the sales graph seems to be moving consistently upward. When recession sets in, it is time to begin swapping the fixed costs with variable costs wherever possible. This is because when sales drop, the variable costs will also decrease, but the fixed costs will remain fixed. And if the fixed cost component is high it can lead to a drastic and disproportionate fall in profit.”
― Anil Lamba, Romancing The Balance Sheet

“So the challenge, therefore, is to increase fixed costs without increasing overall costs. The only way this can be done is by swapping some variable costs with fixed costs.”
― Anil Lamba, Romancing The Balance Sheet

“leverage effect is caused by the presence of fixed costs in the costing structure.”
― Anil Lamba, Romancing The Balance Sheet

“This phenomenon, where a one hundred percent increase in sales can lead to a two hundred or three hundred or four hundred percent increase in profit, is called the leverage effect.”
― Anil Lamba, Romancing The Balance Sheet

“Often, the gain through market appreciation is far more than the dividend the shareholder would have received.”
― Anil Lamba, Romancing The Balance Sheet

“Current assets, however, represent what is known as Gross Working Capital.
You may also be familiar with the expression Net Working Capital. Net Working Capital is calculated as Gross Working Capital less Current Liabilities.”
― Anil Lamba, Romancing The Balance Sheet