Posts Tagged ‘balance sheet management’

Income Statement Snapshot

When you read your Income Statement (Profit and Loss Statement) what is your process? Do you just look to see if you made a profit? Try digging a little deeper.

The Big Picture

In the post Balance Sheet | A Different Look we took a look at how we first examine a balance sheet from an overall perspective, much like we look at a family photo. As this is done certain items will Read the rest of this entry »

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Balance Sheet | A Different Look

When you look at a family photo there is something interesting that happens. While at first you may look at the group as a whole, if you look long enough you will invariably begin to think about specific individuals in the picture. You may think about the unique traits they have they you really like or even those traits that can drive you nuts. Do you sometimes find yourself thinking how much someone adds to your family? Perhaps you are even reminded of the challenges someone presents. So, what does this have to do with a company’s balance sheet?

The Balance Sheet in Total

At first glance a balance sheet may look like just a bunch of numbers, but we know Read the rest of this entry »

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Misleading Financial Information

The blog posting Two Dangerous Financial Illusions looked mainly at sales and profitability and how these can often be misleading. Let’s look at some more areas where misleading financial information may present.

Overvaluation of Receivables

Whenever a company undergoes an audit (and to a lesser degree a review), there are certain items on the financial statements that warrant extra scrutiny. A main one is accounts receivable.

One common way that accounts receivable may be over-valued is when Read the rest of this entry »

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Back to Financial Basics

No matter the issue it is easy to overly complicate anything, and this applies to business. Over time it seems that many businesses morph into something almost unrecognizable from what a company started out as. In the process financial basics are a likely casualty. Let’s take a closer look.

Not Always Bad

Of course, this process can be a good thing if the business has encountered changes that must be faced, such as different customer tastes, the competitive environment, the need for new products, and new ways to interact with customers such as e-commerce. That is just common sense and not really the issue I’m concerned with here.

Who Is Driving Change

Even if the changes are desirable and necessary, it is important to consider Read the rest of this entry »

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Fixed or Changing?

You probably have heard the line from Gertrude Stein, “A rose is a rose is a rose” which we take to mean “things are what they are.” For example, when traveling from destination A to destination B, A will remain A and B will remain B. How we travel from A to B may change, but we are still trying to get from A to B.

What Does This Have to Do With Business?

In business it is important to know what is fixed, what changes, and what seldom changes. An unchanging aspect for business would be something like Read the rest of this entry »

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Have a Lean Business

Have you ever tried to lose weight? If so your experience may have ranged from easy to difficult. When it comes to reducing costs a business may have a similar experience. By costs I’m referring to both product cost and expenses. Why do some businesses find it easy to reduce costs while others struggle and eventually stop trying?

Think Lean and Communicate It

Like losing weight reducing costs starts with Read the rest of this entry »

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The Liquidity Trap

Sometimes financial calculations are not what they at first seem. That is, we may not be able to take them at face value. I previously discussed a little about what financial analysis can do for you in Things Financial Analysis Can Tell You. In that post two things mentioned were the current ratio and the quick ratio. Let’s look at these a little closer. To do this we’ll use Read the rest of this entry »

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Things Financial Analysis Can Tell You

In Financial Statements are More than Results I touched briefly on financial analysis, but here I will go into some more detail. The real value of financial statements and other financial information is in the analysis. Allow me to elaborate.

A Simple Example

In math we might see the simple algebraic equation Y = 2X where Y is defined as the dependent variable and X is the independent variable. That is, Y’s value depends on the value of X.

Financial analysis is much like this in that we are looking at what independent variables drive Read the rest of this entry »

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Financial Statements are More than Results

It’s easy to get lost in all the numbers when reading financial statements, particularly for those who rarely read them. By financial reports I mean not just the big three; i.e. the Balance Sheet, the Income Statement, and the Statement of Cash Flow. This also encompasses the supporting schedules and analysis as well.

Results Matter, But

Taking just the three main financial statements, it is important to asses the overall results. For the income statement look at profitability, but also consider Read the rest of this entry »

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Unnecessary Accounting Complexity

Some of the things that frustrate business owners are receiving financial information that is too late, overly complicated, or both. In fact, unnecessary accounting complexity is often the cause of being too late.

Timely Financial Data Matters

If financial information is not provided in a timely manner, some of the issues that can occur are: Read the rest of this entry »

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