Jacobs Matrix Surpasses Mobley Matrix TM
36 Pages Posted: 2 Sep 2007 Last revised: 10 Jun 2016
Date Written: January 13, 2015
Both Mobley Matrix TM and Jacobs Matrix acknowledge the unity of the balance sheets at the start and end of the period under consideration, the income statement for the period, as well as the cash statement for the period. This is because no euro, no dime, no cent can disappear or appear just like that. Everything has to fit perfectly. However the major difference between Mobley Matrix TM and Jacobs Matrix is in the construction of the income statement. Period profit has to be measured purely, of course inclusive of interest, tax and including all relevant factors. Jacobs Matrix does, Mobley Matrix TM does not; the latter is a nominal system that disregards substantialism. The income statement of Mobley Matrix TM cannot stand the test. Moreover, CF for the period, which is a key item in DCF calculus, has been included within Jacobs Matrix.
Over the long term, companies should at least measure and generate three healthy bottom lines: cash flow, profit and return. Mobley Matrix TM misses two out of three; it does not really measure period profit nor return. A more embracing, much better presentation is dearly needed, to make interconnections crystal clear. Jacobs Matrix deals with everything: nominalism, substantialism specific (the entity concept) and substantialism general i.e. to care for the purchasing power of the proprietor's capital, all at one at the same time. Mobley Matrix TM is in need of external systems, which emerge into arbitrary figures for e.g. depreciation (tangible assets) and amortization (intangible assets) - beside interest costs and the burden of tax - for which there is no proof. Jacobs Matrix needs no more to start with, than basic input data, e.g. interest rate and tax rate, the ruling values and standards, and what it gives as output is an 'integrated financial instrument panel' - containing all measures required to safely navigate the corporate ship.
Keywords: Balance sheets, Income statements, Cash statements, CFs, DCF calculus, Cash flow, Profit, Capital return, Yield, Shareholder value, WACC, ROA, EBIT, SEA (Sales, Expense, Assets), Operating effectiveness, The ultimate performance indicator, NVA (Net Value Added)
JEL Classification: M40, G12
Suggested Citation: Suggested Citation