“Hello doctor, how do you manage your work and family life?”, I asked looking at his tired face.
Simple, operation, invest and finance.
(1) Do the operations properly as they are my revenue generating activity, I mean my livelihood.
(2) Then, before I can take come the money to family, I try to invest. I cant give my wife the money, so I purchase assets like gold or something. Sometimes I try to sell away my liquor bottles before going home, those are like selling my assets.
When I do all these, I receive a lot of things.
(3) With the rest, I finance. I hate the word finance, it is all about pay, pay and pay!!
Pay the interest, pay the dividend, repayment of loan.
“Hmmm..interesting”, I said. “How does the family react?”
It all begins with my income statement. After all, that is the thing they are worried about. When I take my profit made, after the buggers have deducted the tax. Lets say this as my profit after tax, family starts a calculation on this. Calculations occur on the inverse order!!
My family is very weak in math, so they add the expenses and subtract the income .
“That is crazy!”, I said.
“No, that is not crazy. That is how they get the gross profit!”
“Then?”, I asked.
“Understand murphy’s law always. Good things always move away and bad things always come to you. So, an increase in asset is cash outflow and increase in liability is cash inflow”.
“Life sucks!”, I said.
“Ya , I know. Family does a post-mortem of my gross profit as stated as above”.
“Is it over then?”, I asked. He laughed.
“ Everything ends with tax again, subtract it to get my lovely money from the operations”.
“Tell me more about the investments. Impressing your wife and disposing your bottles”.
“As I told you before, I receive a lot of things. Add them. When I sell my bottles, I get money. Add them. But, when I buy gold, I shell out money. Subtract them. Remember loans given and advances come here. That’s it. Done with my investments.
“Your financing?”, I asked again” You hate the word na?”
“Yes, subtract and subtract everything that is paid! Your finance looks out of shape!”
“Is that all?
“You are forgetting the non cash”
“There are non cash????”
“Yup! Like the profits that I make on selling my bottles or sometime, I do make provisions . All these are either added or subtracted from PAT. Like, Provisions when increased over years are added and gains & losses I make are subtracted and added respectively.
“In the end, add all the cash from operation, investments and financing”
“Wow!! That is one hell of calculation your family does”.
“I know. In the end we know our cash flows!”.