Understand Your Financial Statements
Do You Measure Your Business Performance Right?
How do you find out if a company is doing well or not? What is the main factor that plays a role in measuring success? When can we say that a company is growing?
It’s the simplest and most universal way of finding out if a company is successful or not.
Wait! Did we just call it simple? For many, finance is one of the most complicated things. And we understand all the confusion that accounting can create.
Experts, however, see it in a different light. Management Reports, i.e. Financial Statements of the company, help them find out about the financial health of a business, making it easy for them to measure the success of a business.
This is why the governing documents of a company require that an Annual Audit is completed for the company at the end of the year or as specified by the MOA. While for companies bound by a regulation Audit is mandatory, it is still highly recommended for companies who are not obliged to complete it as soon as Audit helps stakeholders make a financial health check of the business.
Core Financial Statements that should be used at your business to measure success
1. Income Statement
It is a financial statement that functions as a report of the revenues and expenses of an organization for a certain period of time. It helps in measuring the profitability of your business over a specific period.
2. Balance Sheet
The Balance Sheet differs from the Income Statement in the fact that it determines the financial healthiness of your business at a certain point in time. It helps you identify how much you owe and how much you own.
3. Cash Flow statement
It helps you identify the liquidity of cash in the business. The preparation of a cash flow statement requires deep insight of the cash flow in the business and the right perspective to keep the statement relevant.
With the help of these three Financial Statements, you will be able to ascertain the financial health of your business. This, in turn points towards your business performance which depends on identifying the money flow of your business.
Want to find out if your business is performing well? Analyse the Financial Statements.
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