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Banks, Finance, Grants, Insurance, Loans, Mortgages, Securities, Stocks
How to Read Financial Statements

Whether you run a small business or a large corporation, your company's success hinges not only on the quality of its products and services, but also on your ability to steer its ship in the right direction.

Because business fundamentally is about money, it requires you to understand the bottom line -- which is impossible to do unless you can read and comprehend your company's financial statements.

"Financial statements are the box scores that tell everyone how your … business is doing financially," says Small Business Trends contributor Rob Starr.

"They usually contain two reports that tell the story of your finances: balance sheet and profit and loss statements."

Knowing what each of these statements show will help you make better decisions for your company.

The balance sheet lists your company's assets (i.e., what your company has) and liabilities (i.e., what your company owes).

"The balance sheet summarizes key financial information at any point in time. It provides an efficient way to determine health of the organization," Derek Carter, chief solutions officer for Ceterus, tells Starr, adding the bottom-line number on every balance sheet is the "current ratio" -- current assets divided by current liabilities.

"If the ratio is less than 1, that company could have issues paying their current liabilities."

Next: profit and loss statement, shows how profitable your business is over a specific period of time. "I suggest reviewing either several months at a time or year over year. Doing so will help you see trends and help drive future business decisions," Carter tells Starr, who says, "Spotting these trends will help you to make any adjustments quicker. If sales go down for several months in a row but payroll doesn't, it may be obvious you might need to do something with your number of employees."

  #EZ.38048 Exp 12-15
    Ref:   by Matt Alderton | December 05, 2018  
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