How do you calculate interim management balances?
The interim management balance, also known as the MIS, is one of the financial indicators you need to monitor in your accounts to manage your business effectively.
To be more precise, there is not one interim management balance but several .
What are they and how do you calculate them? Tables and examples in this article!
What are the different intermediate balances?
Interim management balances are the results of calculations made at different stages of an accounting analysis, based on sales.
There are 9 MIS:
- the sales margin (or gross margin) for commercial companies,
- production for the financial year for craft and industrial companies,
- value added,
- gross operating surplus,
- operating profit,
- financial result,
- profit on ordinary activities before tax,
- exceptional items,
- net profit for the year.
These financial indicators give structure to the financial statements, but they are also found in the profit and loss accounts at the end of the financial year, or in business plans when a company is being set up.
What are interim management balances used for?
Breaking down a company's results into interim management balances makes it possible to :
- analyse the company's financial structure using a number of management indicators, in particular :
- production, the company's normal activity,
- related to investments and financing,
- of an exceptional nature ;
- analyse its performance by identifying the income and expenses that have the greatest impact on its profits or losses;
- measure profitability;
- compare several accounting periods over time;
- compare MIS as a percentage of turnover with other companies in the sector;
- make decisions and adjust company management.
MIS also help to calculate the company's self-financing capacity (CAF), so that it can expand, finance a new project and demonstrate its financial health to shareholders and banks.
How to calculate MIS?
Here is a table summarising the calculations of intermediate management balances, in order:
|
GIS table |
|
|
GIS |
GIS calculation |
|
Sales margin |
= Sales of goods and services excluding VAT (turnover) |
|
Production for the year |
= Production sold |
|
Value added (VA) |
= Production for the year |
|
Gross operating surplus (EBITDA) |
= VA |
|
Operating profit (EBIT) |
= EBITDA |
|
Financial result (FR) |
= Financial income |
|
Profit before tax and exceptional items (EBIT) |
= Operating income |
|
Exceptional items |
= Extraordinary income |
|
Net profit for the year |
= EBIT |
Interim management balances table: example
You can transfer your interim management balances to Excel or use accounting software:
| Sales of goods and services excluding VAT |
450 000 |
|
| Purchases of goods excluding VAT |
120 000 |
|
| Sales margin |
450 000 - 120 000 |
330 000 |
| Production of ancillary products |
4 000 |
|
| Subcontracting |
14 000 |
|
| VA |
330 000 + 4 000 - 14 000 |
320 000 |
| Staff costs |
30 000 |
|
| Taxes |
1 000 |
|
| EBITDA |
320 000 - 30 000 - 1 000 |
289 000 |
| Operating income |
0 |
|
| Operating expenses |
2 000 |
|
| Depreciation and amortisation |
3 000 |
|
| REX |
289 000 - 2 000 - 3 000 |
284 000 |
| Financial income |
0 |
|
| Financial expenses |
2 000 |
|
| Net financial expense |
0 - 2 000 |
- 2 000 |
| EBIT |
284 000 - 2 000 |
282 000 |
| Extraordinary income |
1 500 |
|
| Exceptional expenses |
500 |
|
| Extraordinary profit |
1 500 - 500 |
1 000 |
| Income tax |
40 000 |
|
| Net profit |
282 000 + 1 000 - 40 000 |
243 000 |
How should MIS be interpreted?
These management indicators enable us to assess a company's performance,
- whether it is due to normal activity or to exceptional activity,
- whether its positive results should be put into perspective following a fund-raising exercise or a slowdown in investment, for example, or whether the opposite is true.
Here are some possible interpretations:
- the gross margin highlights the profitability of the company's business , the development of its commercial policy and its negotiating capacity with suppliers and customers;
- production for the year includes capitalised production, which may inflate net profit for the year but hide a fall in sales;
- added value is the surplus wealth created by the company, and demonstrates its ability to cover salaries and social security contributions;
- Gross operating surplus is just as revealing: it is the cash flow remaining after payment of wages and salaries and tax and social security debts, without taking into account investment and financing policies or exceptional events;
- operating profit is the wealth generated by the company's activity, but taking into account its investment policy;
- Net financial income shows the company's financial position, particularly if it is in debt;
- pre-tax profit on ordinary activities measures the impact of the company's financial policy over the last financial year(s);
- Extraordinary income reflects an exceptional situation that is not part of the company's normal business activity; it is normally one-off and should be kept in perspective;
- lastly, net profit simply represents the company's profit or loss for the financial year. It is provided to shareholders to determine future management policy and the possibility of paying dividends or making savings, among other things.
Article translated from French