Finance has shown me many things over time, but perhaps one of the more powerful concepts is “profit versus turnover”. For the golfers out there, I liken this to “driving for show VERSUS putting for dough“.
Underlying profitability and the associated free cash available for debt servicing are focal points for a Banker with any finance proposal – as this shows whether there is the expected ability to repay the loan within the proposed terms. The simple “revenue line” however, whilst interesting for trend and margin analysis, by itself – does little to prove debt servicing ability.
This … Read More