If you’re in business, it’s likely that you’ll need to understand and prepare financial statements. Financial statements are required by law and other businesses, so you can’t get away without them. But what are the right documents for your industry? We’ll talk about the balance sheet, income statement, cash flow statement and how each of these documents can be used.
The balance sheet is a snapshot of the company’s financial position at a given point in time. It shows the company’s assets, liabilities and equity. Assets are things that provide future benefit to the business such as cash and inventory; liabilities are debts or obligations owed by the business such as accounts payable; equity represents owners’ investment in their company after deducting all its liabilities from its assets
- The income statement is a summary of revenue and expenses for a specific period. It shows the company’s profitability and therefore, it’s also called the profit and loss statement (P&L).
- An income statement starts with revenues from selling products or services and then deducts costs associated with those sales such as cost of goods sold (COGS), operating expenses, taxes, etc., to determine net income or net loss for the period.
Cash flow statement
Cash flow statement is a financial statement that shows how much cash is generated, spent and retained by a business over a period of time. It is often used to evaluate the performance of a business by providing an insight into its ability to generate … More >>>
A business financial statement is a report of the company’s financial performance and condition. These statements are prepared from information contained in the books of account and consolidated with other information that has been gathered from sources external to the company.
The Income Statement is a financial statement that shows the revenues, expenses and profits of a business over a given period of time. It’s important to understand how to read an income statement because it will help you make better decisions as a manager or investor in a company.
The following sections will explain what each line item on an income statement means and how you can use this information to assess whether or not a company is performing well financially:
- Gross profit (or gross margin): This is calculated by subtracting cost of goods sold from total revenue
- Operating income/net operating profit after taxes (NOPAT): This represents how much money your business has made after paying for all operating expenses such as salaries, rent, utilities etc but before taking into account taxes or interest payments
A balance sheet is a snapshot of a company’s assets, liabilities, and equity at a given point in time. Assets are things that have value to the business–cash, inventory, property–while liabilities include debts owed by the company (think credit card payments or loans). Equity is the difference between assets and liabilities; it represents how much owners have invested in their business plus any profit they’ve made since starting out.
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