K + S Group Background

K + S Group are an international resource company. Operating for over 125 years, the Group are the self-proclaimed world’s largest salt producer and one of the top potash providers worldwide.

From humble beginnings during the 19th century, the K+S Group have expanded from Joint Stock Company for Mining and Deep Drilling, to include production sites in Europe, North America and South America as well as through a global distribution network.

The company's vision is "A source of growth and life through nutrients and minerals".

The overriding goals of the financial management of the K+S Group include:

• securing liquidity and controlling it efficiently across the Group,
• maintaining and optimising the financial capacity of the Group as well as,
• reducing financial risks also by means of financial instruments.

In cash management the Group focus on the management of liquidity and payment streams. In order to maintain and optimise financial capacity, the Group aim to achieve a situation where the K+S Group has a capital structure in the long term, which is orientated to the usual criteria and indicators for an "investment grade" rating. 

In 2015, the K + S Group opened a new Analytic and Research Center in Unterbreizbach and continued to support a new K+S potash plant in Canada.

K+S Group achieved revenues in financial year 2014 of about € 3.8 billion and an Earnings Before Interest and Tax (EBIT) of € 641 million. In a press release on 12 November 2015, Dr. Burkhard Lohr, Chief Financial Officer, explained that the current high level of capital expenditures, as well as the strict cost discipline within the Group, will have a positive effect on the financial situation of the K+S Group in the very near future.

In the same press release, Norbert Steiner, Chairman of the Board of Executive Directors, reaffirmed the K + S Group medium to long-term growth outlook with a forecast for an incremental increase to around € 1.6 billion by 2020.

Source: http://www.k-plus-s.com/en/

The entity concept

Well it's Monday of Week 2 and I'm already behind. There are a lot of little tasks to complete in this course so I know things will get away from me if I don't knuckle down. With all that in mind, I'm writing my first blog today while eating lunch at my desk. I read Chapter 1 of the Study Guide over the weekend. Working full-time, the weekend and my lunch breaks are where most of the study action takes place.

Reflecting on the chapter over a sandwich I found the notion of proprietorship and the entity concept of a firm very interesting. I've never given much thought to how large companies manage their finances. To be honest I can hardly manage my own. So it was difficult to wrap my brain around why someone would keep journals and ledgers that both represent the same set of figures but in different formats and then I had my first 'ah ha!' moment.

The two separate records are important for a number of reasons but by relating my learning back to communications I realized that one of these reasons is that they are prepared for two separate audiences.The shareholders of a firm are more likely to be interested in the bigger picture - the equity and how this is projected. The day-to-day transactions of a firm that may be interesting to a business manager do little to project the future of a firm unless they are represented as:

Assets: Assets are those aspects of a firm we expect will provide future economic benefits to a firm; that is we expect will add value to a firm in the future.

Liabilities: Liabilities are those aspects of a firm we expect will use up future economic benefits of a firm; that is we expect will take away value from a firm in the future.

Equity is often referred to as a ‘left over’ concept: what is ‘left over’ for the owners of a firm after liabilities are deducted from assets.

Assets and liabilities represent the value of a firm. Equity represents the value of the interest of its owners in the firm.

Revenue are additions to equity as a result of increases to assets or reductions in liabilities of a firm (but not those changes to assets and liabilities that relate to transactions between a firm and its equity owners).

As the Study Guide explains -

"Accounting is a model, or simplification, of each firm’s economic and business realities. It is an abstraction of all the complex activities of a firm."

I don't know about you but understanding why something is done helps me to process and memorize the way it is done. Accounting is another form of reporting, of looking at the big picture, looking to the future, and presenting this information to your boss with their interests in mind. 

Now back to my sandwich...