What Your Financials Aren’t Telling You

Financial statements are something that can be difficult to read and understand. It can be a real struggle for those not trained to know what to look for. Understanding your financial statements provides greater insight into your business and its direction.

What is a Financial Statement?

A financial statement outlines the overall financial outlook for your business. This statement will give you an overview of the many different things that go into your business’ financials. There are three reports within your financial statement; the balance sheet, income statement, and cash flow statement. The balance sheet provides you with detail on your assets, liabilities, and equity. The income statement shows the revenue and the costs for the business over a period of time. Lastly, the cash flow statements demonstrate the inflow and outflow of cash within the business. Combine all three, and you get your financial statement.

What You Could be Missing

A financial statement is a lot of information to take in all at once. Let’s break down each statement and what you should look for to better understand your business. Within the balance sheet, you will find the shareholder’s equity, which is the money that belongs to you, the shareholder. To see this amount, simply subtract your assets from your liabilities. Your income statement can help you understand where you are making money and where you are losing it. Throughout the statement, you can see various revenues and expenses that will determine your bottom line. Finally, when deciding how much money you have on hand to pay certain costs, take a look at the statement of cash flows.

It is important to remember that each report contains ample information, making it easy to miss certain key points. At Baldwin CPAs, our experience team of accounting professionals know what to look for in each statement and how to use that information to help. Reach out to our team today for assistance in preparing and understanding your financial statement.

This article was written by Brandon Hackworth. Brandon is an Accounting Specialist I with Baldwin CPAs. For more information on the support Baldwin CPAs can provide you, contact brandon.hackworth@baldwincpas.com.