October 2019
plm@bcpllc.com, 315-234-1189

Businesspeople who have a good handle on the three components of financial statements - the balance sheet, income statement and statement of cash flows - should be equipped to make smart business decisions. To review the important attributes of each component, the following article explains, in a nutshell, these three parts as well as financial statement figures and ratios worth monitoring.  

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 Your Financial Statement

Do you truly understand your company's financial statement? If you have a good handle on its three components - the balance sheet, income statement and statement of cash flows - you should be equipped to make wise business decisions.

Behold the Financial Statement

On this report, you tally your company's assets, liabilities and net worth to create a snapshot of its financial health.
Net worth or owners' equity is the extent to which assets exceed liabilities. Because the balance sheet must balance, assets must equal liabilities plus net worth. If the value of your liabilities exceeds the value of the assets, your net worth will be negative. There are a number of balance sheet ratios worth monitoring, including:

Growth in accounts receivable compared to the growth in sales. If receivables are growing faster than the rate at which sales are increasing, customers may be taking longer to pay. They may be running into financial trouble, or finding quality issues with the products or services.

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