Quick! Show Me Your Value

Let ‚ s Review:

• This chapter provides details for the position component of Step 3: identify financial imperatives.

• A balance sheet is where the organization tracks the amounts of assets, liabilities, and owner ‚ s equity it has. Because money is always flowing in and out of an organization as a result of sales and purchases, the balance sheet is a snapshot of one point in time. The balance sheet reflects the position or financial health of the organization on a specific date.

• The proportion, or size of each asset or liability in relation to others, is what is meant by the position of an organization. Too many liabilities versus assets can be a very risky and high-cost situation for the executives of an organization to manage. Likewise, lack of attention to assets such as accounts receivable or inventory can cause serious cash flow problems for the organization.

• Operating ratios (such as days inventory outstanding) or financial ratios (such as return-on-assets) can give the WLP professional a quick idea of problems in the organization and, therefore, what executives will value from WLP interventions.

• Examples of financial value chains were shown connecting WLP interventions to assets and liabilities. Chains could also have been drawn using operating or financial ratios as the leftmost Senior executive measure.

• Because assets and liabilities are tied to the income and expenses that generated them, the same WLP intervention can be shown to affect financial imperatives for both profit and position. This is good news for the WLP professional, as this situation creates more options in communicating value.

The next chapter looks at the third financial imperative for Senior-level managers: cash.