Your business financials provide an important look at the financial health of your company. Therefore, it’s essential that you know the terms for each type of report and that you review them regularly. Below we outline some of the most important business financials and how you can use them to your company’s advantage.
Profit and Loss Statement
Also known as the income statement, the profit and loss statement is the most essential one for any business. It highlights how your company gets its revenue as well as its expenses and most profitable ventures. With this information, you can create a budget and income projections. This gives you the data you need to determine if you should keep or change your current financial strategy.
Your company’s balance sheet tells you and investors how much the business has in assets and how much it owes. Assets include such things as bank account balance, equipment like computers, and personal property. Liabilities include business loans, rent payments, and anything that requires a budget allocation each month. Although the liabilities will sometimes be greater, especially in the earliest days after launching your business, the long-term goal is to consistently have a greater asset column.
Cash Flow Statement
A cash flow statement for your business financials should include three sections with the first being operating activities. This summarizes money coming into and out of your company from sales and daily expenses. Next is any investment activities such as the buying and selling of business assets. Last is financing activities. This covers the amount of cash coming into or out of your business because of activities related to equity.
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The above represent only the bare minimum business financials you should know about and regularly review. We would be happy to discuss these and others during a personal consultation. If you’re looking for alternative forms of business financing, we can help you with that as well.