Improve cash flow graph to solve accounting inconsistency

[counting]

I've always dissatisfied with the lack of some fundamental charts or UI in Capitalism series, especially the lack of cash flow chart. Right now, the profit & lost graph is just a rough guide, and sometimes it causes accounting inconsistency. Most of the time, you need to monitor the fluctuation of cash manually to find the truth. I'll list 2 examples below showing these situations.

depreciation inconsistency.rar

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The first one is an one mine corporation, where in fact it's gaining cash, but the profit & lost graph it's in the red. As you compare two before and after screenshots 1 year apart, you can see the cash increases (It gains exactly the amount that "disappeared" into "consumption of reserve"). The cause of this inconsistency is due to the accounting concept of a non-cash depreciation depletion and amortisation, where an expense is listed to reflect a lost deduced over time, but doesn't involved cash transaction (The illusive "consumption of reserve" in firm expense). Indeed you might lose the initial investment in the long run afterward, but cash flow is still positive every month.

depreciation begin.jpg (573.01 KiB) Viewed 1132 times

depreciation result.jpg (590.23 KiB) Viewed 1132 times

depreciation cause.jpg (604.73 KiB) Viewed 1132 times

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Other profit inconsistency.rar

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The second one is a normal corporation selling cola, where the profit & lost graph shows it's in the green, but in fact losing cash. As you compare the before and after screenshots 1 year apart, you can see the company is losing cash. The cause of this inconsistency is due to the profit & lost graph only include the aggregate firms' income statements, not the other profit you can see in the corporation income statement. So the loan interest expense let you to think it's in the green, but the cash flow is in fact negative every month.

Loan lost begin.jpg (601.71 KiB) Viewed 1132 times

Loan lost result.jpg (636.4 KiB) Viewed 1132 times

I think we need to improve the profit & lost graph to either let it reflect the real cash flow over time, which would be truly useful than just eyeballing. A complete break down of cash flow chart for players to analysis the corporation's financial situation with precision and less confusion. Finally we might need to properly introduce the concept of depreciation, depletion, amortisation, with long-term (non-fixed) assets that depreciate/degrade over time, so the long term capital investment will be meaningful and realistic. Even pave the road for utility products.

[David]

FYI, the reason why it was implemented this way is to avoid other incomes and losses like stock returns, which could be in huge amounts at times, to interfere with the player's ability to keep track of the operating profits.

And the help text for the profit bars explains that they represent the operating profits only (screenshot attached).

[counting]

Yep I know, the corporate income statement is not a good reflection of operation profitability, but the current profit & lost graphic also lacks in certain situations to reflect the real operation cash flow as I shown in these 2 cases, which reflect exactly the opposite for players who have less accounting knowledge.

For example, the lack of reflecting interests payment can severely damage players perception of being "in the green" in the beginning of a game, where interest payment can cause players to question the calculation of cash when they saw the operation profit is positive but somehow go bankrupt in the mean time. Not everybody is as literate in finance to understand the difference between operation profit and "positive cash flow" (which is a good point as education purpose I suppose, but not for game play and in-game UI).

This is why I suggested the use of Cash Flow Charts or Cash Flow Statements to fill in the gap. With almost no delay in payment in game and almost always cash transaction, the CF is a much better way of reflecting cash profitability within a period of time which most players would understand better. The income statement can reflect accrual basis accounting for players with more financial background to analyse. The introducing of CF can also open future extensions for more realistic income statement implementation and balance sheet when utilities or financial structure mechanism are introduced.

[David]

Okay, I see.

[Arcnor]

Yep I know, the corporate income statement is not a good reflection of operation profitability, but the current profit & lost graphic also lacks in certain situations to reflect the real operation cash flow as I shown in these 2 cases, which reflect exactly the opposite for players who have less accounting knowledge.

For example, the lack of reflecting interests payment can severely damage players perception of being "in the green" in the beginning of a game, where interest payment can cause players to question the calculation of cash when they saw the operation profit is positive but somehow go bankrupt in the mean time. Not everybody is as literate in finance to understand the difference between operation profit and "positive cash flow" (which is a good point as education purpose I suppose, but not for game play and in-game UI).

This is why I suggested the use of Cash Flow Charts or Cash Flow Statements to fill in the gap. With almost no delay in payment in game and almost always cash transaction, the CF is a much better way of reflecting cash profitability within a period of time which most players would understand better. The income statement can reflect accrual basis accounting for players with more financial background to analyse. The introducing of CF can also open future extensions for more realistic income statement implementation and balance sheet when utilities or financial structure mechanism are introduced.

This is exactly something I suggested a while back and would love to see implemented. A cash flow statement is a powerful tool for any business.