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The Essentials of Business Financial Statements

At the end of an accounting period, a business must prepare three primary financial statements —the balance sheet, the income statement, and the statement of cash flows. These statements are included in a business’s annual financial report for review by investors, lenders, and others.

Breaking Down the Balance Sheet for a Business

At the end of each accounting period, you take a snapshot of your business’s condition. This snapshot — called a balance sheet — gives you a picture of where your business stands — how much it has in assets [more…]

Understanding Costs and Other Balance Sheet Values

The values for assets and the costs reported in a balance sheet can be a source of confusion for both business managers and investors, who tend to put all dollar amounts on the same value basis. In their [more…]

Drawing Conclusions from Your Final Balance Sheet

You can analyze balance sheet numbers through a series of ratio tests to draw conclusions, check your cash status, and track your debt. Because these are the types of tests financial institutions and potential [more…]

What Is an Income Statement for a Business?

Did your business make any money? You can find the answer in your income statement, the financial report that summarizes all the sales activities, costs of producing or buying the products or services [more…]

Preparing an Income Statement for a Business

Before you can prepare an income statement for your business, you have to calculate Net Sales and Cost of Goods Sold using information that appears on your worksheet. Then, you can use the rest of the [more…]

Using an Income Statement to Make Business Decisions

Many business owners find it easier to make business decisions and compare their income statement trends using percentages rather than the actual numbers. Calculating these percentages is easy — you simply [more…]

Producing an Income Statement for External Use

The income statement you produce for external use — financial institutions and investors — may be very different from the one you produce for in-house use by your managers. Most business owners prefer [more…]

Looking at a Business’s Statement of Cash Flows

A business has its choice between two quite different methods of reporting cash flow from operating activities in its statement of cash flows. Financial reporting standards permit either approach — the [more…]

Understanding Profit and Loss Reports

Profit performance reports prepared for a business’s managers typically are called P&L (profit and loss) reports. These reports are prepared as frequently as managers need them, usually monthly or quarterly [more…]

When to Prepare Multiyear Financial Statements

The three primary financial statements of a business are generally reported in multiyear financial statements, using a two- or three-year comparative format. Generally accepted accounting principles [more…]

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