Accounting for my business

OK, this is an accounting post where i show how my Eve business would be accounted for in real life - move on if this is not your thing!

My business model is very simple at present:

 - I buy from sell orders in Jita

 - I pay to have the items couriered

 - I put the items up for sale in Dodixie and Amarr at a 25% profit margin

 - I change the selling price as appropriate to stay competitive

 - I collect the sales proceeds

So, the Profit and Loss Account below captures all the above and is the simple part of it all:

(items in yellow is where i have had to input to the spreadsheet, the rest are deduced)

Revenues are the total sales i have made from Dodixie and Amarr.  Combined that comes to 54.6bn in November.

By working backwards i know that my profits from selling these items was 17.6bn isk in November.

And then i have all the costs associated with making the sale: Sales Tax; Broker Listing Fees; Broker Price change fees; and courier fees.  They came to 6.8bn isk.

Take off the 1.4bn isk to buy the Plex and so my profit for November was 9.4bn isk which is the increase in my wealth.

The main thing to notice here is that revenues increased by 48% to 54.6bn but my profit increased by 124% to 9.4bn.  Partly due to the price of Plex being the same but mainly due to me selling items at a higher margin than the targeted 25%.

The Balance sheet just adds up my assets which should be the same as the sum of all my profits:

Pretty simple balance sheet.

In November i had 1.1bn of stock in my hanger waiting to be put on the market to sell, i have 18.6bn of items for sale in Dodixie and Amarr and that has a 20% provision against it of 3.7bn as a very cautious estimate of what i may have to reduce prices by to sell it all.  And then there is the 0.7bn isk in my wallets.

So, total wealth was 16.6bn which is also the sum of all the profits i have made since i started in August 2020.

The Cashflow statement then answers the question of how can i make 9.4bn isk of profit but only generate cash of 0.6bn isk.

So, we start in November with 10.8bn of profits and then we need to make a series of adjustments to recognise the investment i have made in 'working capital'.

firstly, stock in hangers increased from 0.0 to 1.1bn isk - that has therefore absorbed 1.1bn isk of cash.

secondly, the value of items i have for sale at the end of the month increased from 8.9bn to 18.6bn isk - so that absorbed 9.7bn isk of cash.

thirdly, the provision rose from 1.8bn to 3.7bn.  This is a non-cash loss so we reverse that rise of 1.9bn out.

what that means is that a November trading profit of 10.8bn actually created 2.0bn isk of cash.  the rest was invested back into the market.

that 2.0bn isk covered the 1.4bn isk Plex payment to leave 0.6bn isk to add to the 0.1bn that was in my wallet at the end of October.

Simples.

. . . . . . as an aside, this is why in the real world many companies that are growing very fast seem to have very little cash to spare, it is all going back into the business to drive the growth.  In my case, it is all being used to buy more items in Jita to sell in Dodixie and Amarr.