The Company Board® is a graphical presentation of the financial results of a company. Individual line items in the Income Statement and Balance Sheet are represented by colored stacks, with the scale shown in the center. For example, here is Google’s 2012 annual report numbers.
The smaller left side of this board is the Income Statement.
- money coming into the business is shown by the gold stacks (Sales Revenue, and sometimes by additional Adjustments)
- the direct Cost of Revenue (COGS or COS) is shown by the blue stacks;
- other Expenses including SG&A, R&D and Taxes are shown by silver stacks;
- and the Net Income is given at the bottom, represented by black stacks for Profit (and shadow stacks if a Loss)
The larger right side of this board is the Balance Sheet.
- silver represents Cash, Receivables and other (non-inventory) Current Assets. Receivables are automatically calculated to their position on Days Sales Outstanding.
- the value of Inventories is shown by the blue stacks along the blue arc;
- so the silver and blue stacks represent the Current Assets
- and Fixed Assets are shown as copper stacks on the right.
The total amount of these silver, blue, and copper stacks represents the Total Assets, and is equal to the combined total of Liabilities and Equity:
- red stacks in the red area of the Balance Sheet represent Short-Term Debt (Current Liabilities) and Long-Term Debt. The stacks nearer to the Cash area are the short-term liabilities coming due within the year;
- black stacks in the black corner of the Balance Sheet represent the Equity.
What can we see about Google’s 2012 results from this visualization? First that it is very profitable (Income Statement), and has very little debt (Balance Sheet). We don’t need to know what the numbers are, because the information as presented here is showing everything as a web of unspoken ratios.
In other words, the bottom line Net Income of 2 stacks is the profit from the top line Sales of 10 stacks. If you turn on the Ratios in the bottom right corner you will see that, yes, the Return On Sales is about 20% (and you can see the exact numbers at the same time).
Similarly, $22 billion might sound like a lot of debt. But when you see all the red Liabilities stacks next to all the black Equity stacks, the debt looks comparatively unimportant (and correctly so).
So the Company Board visualization doesn’t just present financial data in a more accessible format, it also prioritizes that information and allows a rapid assessment of a company’s health and key areas of strategic concern.
Other items you can see in this graphic include that Google makes more money from its cash and investments than it pays in Interest expense (the finance line is gold, not silver). This correlates with the high amount of short-term investments and low amount of debt on the Balance Sheet. Also, the substantial amount in the Balance Sheet’s Goodwill (how much more than book value Google paid in buying other companies) demonstrates Google’s aggressive growth-through-acquisition strategy.
At Andromeda Training we teach business acumen workshops. The rapid visualization of a company’s finances is useful in the classroom to connect the game board learning back to the client’s real world. And it is useful after the classroom, to refresh the intellectual learning and the experience of the business simulation.
But the Company Board is useful even if you have never participated in an Income/Outcome business simulation. The real power of the Company Board is that it simplifies complex information. Everyone is used to seeing financial statements as columns of numbers – the Company Board provides a new, different, way to approach that same information and to identify immediately if a company looks healthy or not.
Download a free version of our iPad app here or by searching for Visual Finance in the Apple Store. And watch for expanded versions being launched in the near future.