When you understand the elements of accounting, the essence of business becomes clear. It’s much more than cash in, cash out.
We convey that essence in a diagram called The Value Cycle.
- The business raises funds from its shareholders
- It leverages those funds with debt
- With those funds it acquires assets for revenue generation
- It then sacrifices some of that asset value, in order to...
- Generate value
- The net value generated or consumed is attributed to shareholders as profit or loss.