Understanding Financial Statements

UNDERSTANDING AND USING FINANCIAL STATEMENTS

Presented by

SCORE?

Indianapolis Chapter

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THE BUSINESS "REPORT CARDS"

Financial Statements are the report cards of a business. They portray the activities of a business to third parties, such as investors, banks and creditors.

Most important of all, however, these Report Cards are the most significant tools that a business owner has available to successfully manage his or her business.

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Why Learn About Financials?

Two very good reasons: 1. To help you better understand and manage your business activities, and 2. To provide those who have a financial stake in your business (partners, other owners or banks) vital information about your business problems or achievements

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WHAT ARE FINANCIAL STATEMENTS?

There are four major financial statements:

? Income Statement (or Profit & Loss) ? Balance Sheet ? Statement of Cash Flow Statement of Funds Flow

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INCOME STATEMENT

A statement, prepared for a specific period of time (month/year), that lists:

? Your company's SALES or REVENUE ? The COST OF SALES (cost of the products you sell or the

cost of materials, labor, and overhead if your business is contracting or a service organization)

? The EXPENSES incurred to generate the sales and pay for

administrative costs

? The NET INCOME (or loss), for the period, which equals

sales less cost of sales and expenses)

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