How do you calculate intermediate operating totals?

By Nathalie Pouillard

Published: October 19, 2024

The interim management balance, also known as the MIS, is one of the financial indicators you need to keep track of in your accounting, to help you manage your business effectively.

To be more precise, there isn't just one intermediate management balance, but several .

What are they, and how do you calculate them? Tables and examples in this article!

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What are the different intermediate balances?

Intermediate management balances are the results of calculations made at different stages of an accounting analysis, based on sales.

There are 9 MIS:

sales margin (or gross margin) for commercial companies,
production for the year for craft and industrial companies,
added value,
gross operating surplus,
operating income,
financial result,
current income before tax,
extraordinary income,
net income for the year.

These financial indicators are used to structure financial statements, but they are also found in income statements at the end of the year, or in business plans when setting up a new company.

What is the purpose of intermediate management balances?

The breakdown of a company's income statement into interim management balances makes it possible to :

analyze the company's financial structure by means of a number of management indicators, in particular :
- related to production, the company's normal activity,
- related to investments and financing,
- of an exceptional nature;
analyze performance by identifying the income and expenses that have the greatest impact on profits or deficits;
measure profitability;
compare several accounting periods over time;
compare MIS, as a percentage of sales, with those of other companies in the sector;
make decisions and adjust company management.

GIS also helps to calculate the company's cash flow, enabling it to expand, finance new projects and demonstrate its financial health to shareholders and banks.

How to calculate MIS?

Here is a table summarizing the calculation of intermediate management balances, in order:

GIS table
GIS	GIS calculation
Sales margin	= Sales of goods and services excl. - Purchases of goods excluding VAT
Production for the year	= Production sold + Capitalized production +/- Inventory production
Value added (VA)	= Production for the year + Sales margin - Intermediate consumption (subcontracting, etc.)
Gross operating surplus (EBE)	= VA + Operating subsidies - Taxes - Payroll costs
Operating income (REX)	= EBITDA + Operating income - Operating expenses - Depreciation, amortization and operating provisions
Financial result (RF)	= Financial income - Financial expenses
Profit before tax and exceptional items (EBIT)	= Operating income +/- Financial income
Extraordinary income	= Extraordinary income - Extraordinary expenses
Net income for the year (NI)	= EBIT + Extraordinary income - Corporate income tax - Employee profit-sharing (i.e. Total income - Total expenses)

Example of a management intermediate balance table

You can transfer your intermediate balances to Excel or use an accounting software package:

Sales of goods and services excluding VAT		450 000
Purchases of goods excluding VAT		120 000
Sales margin	450 000 - 120 000	330 000
Production of ancillary products		4 000
Subcontracting		14 000
VA	330 000 + 4 000 - 14 000	320 000
Personnel expenses		30 000
Taxes		1 000
EBITDA	320 000 - 30 000 - 1 000	289 000
Operating income		0
Operating expenses		2 000
Depreciation and amortization		3 000
REX	289 000 - 2 000 - 3 000	284 000
Financial income		0
Financial expenses		2 000
Net financial income	0 - 2 000	- 2 000
EBIT	284 000 - 2 000	282 000
Extraordinary income		1 500
Non-recurring expenses		500
Extraordinary income	1 500 - 500	1 000
Income tax		40 000
Net income	282 000 + 1 000 - 40 000	243 000

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How to interpret MIS?

These management indicators enable us to assess a company's performance,

whether it is due to normal business or to exceptional activity,
whether its positive results are to be put into perspective following a fund-raising or investment slowdown, for example, or the opposite.

Here are a few possible interpretations:

gross margin highlights the profitability of the company's business , the evolution of its commercial policy and its negotiating skills with suppliers and customers;
production for the year includes capitalized production, which may inflate net income for the year but conceal a fall in sales;
added value is the surplus wealth created by the company, demonstrating its ability to cover salaries and social charges;
EBITDA is equally revealing: it is the cash flow remaining after payment of wages, salaries, taxes and social security contributions, without taking into account investment policies, financing or exceptional events;
operating income is the wealth generated by a company's activity, but taking into account its investment policy;
financial income shows the company's financial situation, particularly if it is in debt;
income before tax and exceptional items measures the impact of the company's financial policy over the past year(s);
exceptional income reflects an exceptional situation that does not form part of the company's normal business activity; it is normally one-off and should be kept in perspective;
finally, net income simply represents the company's profit or loss for the year. It is provided to shareholders to determine future management policy and the possibility of paying dividends or making savings, among other things.

Article translated from French