An Introduction to Business Concepts: Financial Statements
As a new business owner or one that has recently begun to develop a better accounting system, financial statements can seem like a foreign language. However, these statements can give you a wide range of information about the financial health of your business. Here's a quick look at different financial statements and how they can benefit your business.
Here's a quick look at the most common financial statements that you'll work with for your business:
The balance sheet is one of the most important documents prepared to reflect your company's financial status. It provides a view of the company's assets, liabilities and equity at a particular point in time. It gives you a quick view of how your company's financial status falls, which can help you determine whether it's a good time to expand and invest or pull back while building equity.
An income statement covers a particular period of time and what the company's income has been over that time period. However, it only shows the overall view of the year. This means it will give you a better idea of how much your business makes in the long run, but not the shifts in cash flow that can happen over the course of the time period in question.
Statement of Cash Flows:
This financial statement goes hand in hand with the income statement showing how the income has come in over the course of the year. It provides you with insight into the income cycles of your business. As an example, if your company makes most of its income in the fall and spring with virtually no income in the winter and limited income in the summer, it allows you to adapt your spending to those changes in cash flow. This can be further broken up into operating cash flow, cash from investing and cash from financing.
By knowing how to read and understand the information contained in your business' financial statements, you can gain strong insights into your business' financial health. But what if you're not sure what that information is telling you? At AccountRely, our job is helping you move your company forward, and we're happy to help you with getting a better grip on your financial statements. Please feel free to contact us today to get started.