Bug: Income State and Balance Statement profits

[WilliamMGary]

Save Game: https://1drv.ms/u/s!AlhX1T2J2ByrjfgMPavnOEVpjWo93w

In my save game the income statement is showing $5 bill operating profit but the balance sheet is showing cash increasing $10 billion on is this possible?

[David]

The amount of profits is not always equal to the amount of cash.

If you have increases in non-cash assets, it will also register as profits.

FYI, you may check out these articles:
http://jbdcolley.com/why-dont-profits-equal-cash/
http://www.myvce.com/Tutorials/vceacc04 ... Profit.htm

[WilliamMGary]

It's show my case is increasing by $10 billion but operating profit is reporting $5 billion each year

[eleaza]

It's show my case is increasing by $10 billion but operating profit is reporting $5 billion each year

Basic accounting principle. Balance sheet shows the "stock", and Income Statement shows the "flow". In layman's term, balance sheet is a "snapshot" about how much a company owned/owed, income statement is how much capital (notice, it's capital not cash) flows in/out within a period of time. Thus what you owned (i.e. assets value) in the list shown in Balance Sheet can be "exchanged" between different Assets, for example, you can sell stocks so the stock assets drops in value, and gain cash as assets, or you can sell land/buildings/technologies, so the amount of assets in those fields are "transformed" into cash assets, or simply the stockpile in Inventory assets finally got clear out due to better economic status (these inventory goods were already paid, and could be registered in "expenses" in the Income Statement across many years). You can even gain cash assets by issuing more stocks, so the total amount of cash is added due to more equity from shareholders. There are many ways for cash assets to increase/decrease not related to operating profit (beside operating profit doesn't actually equal to cash income).

There's no one-on-one relationship between cash assets changed in Balance Sheet and the capital flow from operating profit in Income Statement. If you are still confusing, check what "Cash Flow Statement" is about. It is the link between all corporate operations and the cash reserve, and one of the major three financial statements in real life company which doesn't exist in the game (but probably for a good reason. CF volume is very huge since essentially it's the history of all transactions, save games would become very fat if including it). However if it does exist in the game, would probably answer a lot of your questions.

[WilliamMGary]

Okay guys, I'm sorry but I want to ensure we're all on the same page. I have a basic understanding of both the income statement and the balance sheet and I definitely understand why one will reflect different information then another. When it comes to this game, I've been playing it for a very long time and I've never seen the numbers to be so far off

When I first made this post my income statement was showing around $5-$6 billion in profit and the balance sheet was showing $10 billion in profits. I don't know of ANYTHING in the game that could've increased my balance sheet cash to be dramatically differently from the operating cash flow. Normally I may see $100-$500 million difference from technology deals maybe even sells of stocks. In this game the technology deals are not billion dollars a year and my company doesn't own any stocks directly only indirectly via a Subsidiary.

While in the process of launching a new line of products I noticed that the balance sheet started reporting cash loses so I monitored it briefly while setting up operations. The company cash in the bank was $171.17 billion dollars and has increased. Normally in this game the balance sheet would be the best place to identify how cash your company has added to its account but it seems there's a glitch.....I didn't see this type of inconsistency at the start of the game but now something seems out of wack and it doesn't seem to be my knowledge of the income statement, balance sheet or the game unless something has dramatically changed.

[eleaza]

Okay guys, I'm sorry but I want to ensure we're all on the same page. I have a basic understanding of both the income statement and the balance sheet and I definitely understand why one will reflect different information then another. When it comes to this game, I've been playing it for a very long time and I've never seen the numbers to be so far off

When I first made this post my income statement was showing around $5-$6 billion in profit and the balance sheet was showing $10 billion in profits. I don't know of ANYTHING in the game that could've increased my balance sheet cash to be dramatically differently from the operating cash flow. Normally I may see $100-$500 million difference from technology deals maybe even sells of stocks. In this game the technology deals are not billion dollars a year and my company doesn't own any stocks directly only indirectly via a Subsidiary.

While in the process of launching a new line of products I noticed that the balance sheet started reporting cash loses so I monitored it briefly while setting up operations. The company cash in the bank was $171.17 billion dollars and has increased. Normally in this game the balance sheet would be the best place to identify how cash your company has added to its account but it seems there's a glitch.....I didn't see this type of inconsistency at the start of the game but now something seems out of wack and it doesn't seem to be my knowledge of the income statement, balance sheet or the game unless something has dramatically changed.

You probably need a "better" understanding of the major financial statements, and what they are about and represented in the game. And it's not far off in any way.

Balance Sheet is just a "snapshot of assets/liabilities/equities" at certain moment, it doesn't care about the process in between. Hence the negative cash difference in "YTD Changes"(Year-To-Date) is just a comparison between current cash assets at the current moment and the start of the fiscal year (usually Jan 2) cash assets amount at that moment.

You said your cash increase from 171.17b to 171.49b I'd assume for such small increase with billions of income per month should equal to just several days/weeks period of time, not all the way to the start of the year (assume you did absolutely nothing else just observe within these days/weeks, and from your income statement I can summarize the current moment is already at late Q3, like in September). What you should really look for is whether the "cash assets (changed)" field in "YTD Changes", rises from say -5.61b to -5.29b overtime within this observation period of days/weeks. Only a before and after shot of Balance Sheet between your observation period can tell you information related to "capital follow" (YTD changed is just use a fixed starting time/moment as the beginning of fiscal year to take the before snapshot, a very specific comparison)

And there are lots of reasons the total assets dropped, a business can make positive income, but still lose assets. Like investment in building new factories, or any other business assets, or buying stocks within this fiscal year that shrink their value (and can still have positive stock return if previous old stocks not bought in this fiscal year make it up to the losses, however overall still a loss including all assets). One major "cash sink" that can drastically affect assets value is buying media firms at boom time, they are overvalued, you pay premium price, but only get discount business assets in assets, hence a net assets loss (similar things can be said for building raw material firms, you paid a large cash out front, but they don't actually increase value overtime, if you watch raw material firm's income statement you'll see how much you actually lose in its lifetime). Some issues might come from relocating firms, you lose the building cost of that firm in cash assets without gaining any new business assets. Another issue arises when purchasing raw materials/goods in warehouses (I see you love to do that), and if you buy them from the source at a normal price, but store them and set a selling price to your own retail at a much lower price, the Inventory field of Assets will not reflect the "true purchasing value", but the "intermediary selling value" in the warehouse. Hence you will lose Cash assets much faster than Inventory assets grow (this happens a lot if you allow minimum factory price at cost or set very low selling price for internal sales factories/warehouses), at the same time you will still have a "positive" monthly income (simply you just didn't sell the inventory fast enough, as inventory turnover ratio is too low)

There are so many possibilities, without a complete look of what you did in the first 3 quarters, it's difficult to tell exactly what happened in this fiscal year in your balance sheet. (BTW, a very unusual feature in calculating assets in the game is that it only counts 1/3 of the value for stocks. Like when you get 3b in stock return, your stock assets will only increase 1b. Hence be careful when stock assets take majority in the total assets)

[eleaza]

I've been somewhat busy recently, so haven't take a good look in details, and now come to think of it. It is somewhat odd the cash assets changed so much within a year, it would require a lot of assets moving around.

Another possibility is that the bug related to a warehouse/factory layout exploit isn't fully fixed in 3.5.08. And you encounter the cash leaks as I did. You can check the last reply I made in fixing that bug.
http://www.capitalismlab.com/forum/view ... ion#p16947

I don't think any new patch address the issue regarding leaking cash when old stockpile in warehouses/factory are sold to your own retail changed drastically. Even though you pay yourself, the income you get in warehouse/factory is inconsistent with what you pay in retail store to buy those stockpile from upstream. (since it's an average of new/old price, and the true price only change incrementally over time, you pay a lot more in retail stores than your get income from factories/warehouses). Usually the issue isn't detectable, since seldom players change the price so drastically, but you run the game for so long with high inflation to all the price, this effect might become quite severe. And probably you trigger it differently than I did.

[WilliamMGary]

Save: https://1drv.ms/f/s!AlhX1T2J2Byrjfx5hFJcqIgVdWT2xA (Save game and Mod is in this folder latest release of Capitalism lab)

I've been somewhat busy recently, so haven't take a good look in details, and now come to think of it. It is somewhat odd the cash assets changed so much within a year, it would require a lot of assets moving around.

Another possibility is that the bug related to a warehouse/factory layout exploit isn't fully fixed in 3.5.08. And you encounter the cash leaks as I did. You can check the last reply I made in fixing that bug.
http://www.capitalismlab.com/forum/view ... ion#p16947

I don't think any new patch address the issue regarding leaking cash when old stockpile in warehouses/factory are sold to your own retail changed drastically. Even though you pay yourself, the income you get in warehouse/factory is inconsistent with what you pay in retail store to buy those stockpile from upstream. (since it's an average of new/old price, and the true price only change incrementally over time, you pay a lot more in retail stores than your get income from factories/warehouses). Usually the issue isn't detectable, since seldom players change the price so drastically, but you run the game for so long with high inflation to all the price, this effect might become quite severe. And probably you trigger it differently than I did.

Funny I didn't see your bug report but as I was thinking about the issue during my daily routines IRL I was thinking it's almost like cash is leaking out somewhere like one of my execs is stealing money or either a product pricing issue. What I've been trying to explain in this form is that if the operating profit is $6 billion how the hell can I be loosing $5 billion in cash. I was planning of doing a firm by firm audit I did a Products for both warehouse and retail and everything is making a profit. I do use Warehouses (as you know) so this is probably the issue working on uploading my game and the mod to OneDrive.

It took me a long time to figure out what went wrong. The problem is the cost and selling price of a product is calculated on each store instead of each unit, and the purchasing cost persist. Even if the purchasing unit already linked to a new source, or the source's price is changed, the price/cost showing in the product detail screen remain as the old cost, and it updates very slowly. The store seems to think they are still purchasing with the old price (or a mixture of the new and old price) instead of the new price immediately. It will take quite a long time for the cost to equalize. This issue results in leaking cash into nothing (the factory only gets income from the store with the new price, but the store pays the a mixture of old+new cost)

Hmm..how so I would have to go to every factory see the cost of the item and go to the Product Detail screen and check each store and ensure it has the correct wholesale price and if not clear the inventory in the store for it to update? This seems closely related to the issue where a product quality would change and it would take a while to update and reflect it in the store and I was told it wasn't a bug....so maybe a store cost/price update process needs to be reduced or more capable of handling larger number of retail stores.

[eleaza]

Wait a minute, I look into your save (which I usually don't like to with your lock speed script seriously slow down my laptop), and finally notice a very obvious answer - You have inverse inflation turn ON with Normal strength, and right now the inflation is really high over 9%. And with your hundreds of billions of cash, it's about the right amount of cash "shrinking" every month. (about 1.3b decrease a month, hence it's about the right amount of 15+b cash "losses" a year).

When inverse inflation is turned on, you really shouldn't stockpile all your assets in cash form, and only keep the amount that's necessary (or have higher profit margin than the inflation rate).

[WilliamMGary]

Now that makes a lot more sense. I knew there was something I wasn't understanding but I also knew it wasn't the difference between a balance sheet and an income statement.

This explains why when growth was subpar the balance sheet was showing 11 billion gain in cash while operating profit was at 6 billion.