Financial statements are formal presentations of a company’s performance. They show you where a company’s money came from, where it went, and where it is now. Each month you should review your financial statements to keep track of your cash inflows and outflows as well as evaluate your company’s overall performance. As a client of New Genesis Financial, we will review your financial statements with you; however, it is helpful and beneficial for you to understand the basics of financial statements and how they all play together to give the you the full financial picture of your business.
There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. While an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the company generated cash - there is a distinct difference. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders/owners over time.
Although you will receive separate financial statements, keep in mind that they are all related. The changes in assets and liabilities that you see on the balance sheet are also reflected in the revenues and expenses that you see on the income statement, which result in the company’s gains or losses. Cash flows provide more information about cash assets listed on a balance sheet and are related, but not equivalent, to net income shown on the income statement.
As a business owner it is important to understand that no one financial statement tells the complete story. But combined, they provide very powerful information for businesses to gauge their performance.
There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time. Cash flow statements show the exchange of money between a company and the outside world also over a period of time. While an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the company generated cash - there is a distinct difference. The fourth financial statement, called a “statement of shareholders’ equity,” shows changes in the interests of the company’s shareholders/owners over time.
Although you will receive separate financial statements, keep in mind that they are all related. The changes in assets and liabilities that you see on the balance sheet are also reflected in the revenues and expenses that you see on the income statement, which result in the company’s gains or losses. Cash flows provide more information about cash assets listed on a balance sheet and are related, but not equivalent, to net income shown on the income statement.
As a business owner it is important to understand that no one financial statement tells the complete story. But combined, they provide very powerful information for businesses to gauge their performance.
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