Business Financial Statements

Workshop Goals Today, you will learn the following... Understand the importance of financial statements for small business operations and strategy. Learn about the uses of different financial statements. Analyze the information found in balance sheets, profit and loss statements, and cash flow statements.

Considering Financial Statements Consider these questions as you review your financial statements. The questions will help you understand the story that your company’s finances are telling. My Considerations Lender’s Considerations PAST Is my business competitive? Is my business growing? Am I building equity that will provide long-term stability? Does the company make smart financial decisions? Has the company paid back previous loans? Is the company profitable? Has the company built equity? PRESENT Where should I be spending my time, personnel, and funds? Am I on track to achieve my goals? Am I in a positive equity position? How much cash is available to support a new loan? How is the company currently using its capital? What are its current income and cash flows? What are the company’s current goals? FUTURE Are there patterns or trends? Is my business profitable enough to take on more loans or debt? Can I repay loans in the future? Do I need a loan for my future projects? Can the business take on more loans or debt? How will the business use a loan? Are there trends in the industry that hurt or help the business? What assets are available to secure a loan in case of default?

Types of Financial Statements 1 Balance Sheets 2 Profit and Loss Statements 3 Cash Flow Statements

Balance Sheets What can a balance sheet tell you? Asset ownership and value Value of liabilities Value of the owner’s equity Working capital A balance sheet is a snapshot of your company’s financial stability at any given point in time. Balance sheets help track these factors? Stability and resilience of your business Liquidity of company assets Whether you are collecting on and paying invoices in a timely manner

Profit and Loss Statements What can a P&L tell you? Sales income or revenue Cost of goods sold (COGS) Gross profit Overhead costs (or operating expenses) Net profit A profit and loss statement (P&L) provides information about whether your company is profitable. A P&L can help track Profit centers or trends Ways to reduce expenses Growth trajectory

Cash Flow Statements What can cash flow statements tell you? Current operating activities Investment activities Financing activities A formal cash flow statement tracks changes in cash from three activities: operating, investing, and financing. Cash flow statements help track important factors: Financial health Availability of working capital Growth

Remember... Summary Business financial statements are vital documents that help business owners understand their business's past, present, and future. There are many uses for business financial statements, such as showing lenders and investors the value of your business. Three common financial statements used by small businesses are balance sheets, profit and loss statements, and cash flow statements.