Aligning Value at the Senior Level

Senior managers are responsible for setting the vision and pace for the organization. They are ultimately responsible for the organization ‚ s profit, position, and cash, as well as the balance that must be maintained among them. As a quick review, recall that profit is shown on the income statement and consists of the remainder of incoming revenue after the costs of doing business have been subtracted from that revenue. Position is shown on the balance sheet and describes what assets or liabilities the organization is using to gain its profit.

Cash is like the lubricating oil in a car engine. A certain percentage of the organization ‚ s assets must always be kept in the form of cash so that the business can keep paying its bills and running smoothly. If the cash ever dries up ‚ even for a moment ‚ the business grinds to a halt and stops running. Running out of oil in a car can destroy its engine. Running out of cash in an organization can destroy the organization. Cash is shown on the cash flow statement.

Balance is the act of keeping the best mix of profit, position, and cash in place at all times. Balance is measured through ratios. Ratios use figures from different financial statements to calculate balance.