THE FINANCE GHOST: An inconvenient truth

Humour me for a moment and allow the image of an income statement to enter your mind. It starts at the top with revenue, the lifeblood of any business. For every extra rand generated in revenue, there are variable costs incurred. By the time those costs are paid, there’s probably only 15c-25c left, unless the company is a global tech giant with mouth-watering operating margins of 60% and higher.Selling more products or services is the hardest way to make more money for shareholders.

That doesn’t mean corporate management teams don’t find other ways to improve returns to shareholders and bump up their bonuses.Everything that happens below the operating profit line has a larger relative impact on net profit than the benefit of an additional unit of revenue. Any savings in interest or tax drop straight to the bottom line and assist greatly in driving shareholder returns. Thus, corporates dedicate significant time and energy to ...

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