Posts Tagged ‘income statement’

Financial Literacy for Business Owners

If you are a business owner you may already be financially literate, but just how strong is that literacy? Even if you are there are likely some things your CFO, Controller, or in-house accountant can do to improve your understanding of your financial situation. On the other hand if you aren’t financially literate then these same people should be helping you to become so. Read the rest of this entry »

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The Details Matter in Business

How well do you know the details of your business’s expenses? Just as in your personal life, the details matter in business. Read the rest of this entry »

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Every Business Needs Accounting Done Right

Whether you’re a sole proprietor or a multi-employee small company, every business needs accounting done right. In the article Does a Part-time CFO Makes Sense? I touched on this issue, but let’s look a little deeper. Read the rest of this entry »

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Return on Equity

I’ve wondered how many companies calculate their return on equity. It’s a revealing statistic of just how well the owners’ investment is performing. Read the rest of this entry »

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Analyzing Expenses

When you examine your company’s income statement do you find yourself wondering why some expenses seem to have little to do with sales? There are three basic breakdowns of expenses that will help you when analyzing expenses. Read the rest of this entry »

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Make Profit Count

Ever wondered why a company that seemed to be doing so well suddenly failed? Often times the reason is that management took their eyes of the ball, with the ball being defined as cash. I touched on this earlier in Cash Flow – The Bottom Line. Basically the issue comes down to realizing that in order to make profit count it is essential that profit is converted to cash.

Cash is Critical

Without adequate cash a company will be hard-pressed to pay bills. I’ve had clients and been an employee of companies that were very profitable on paper. But, that’s on paper only. If you looked only at Read the rest of this entry »

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Understanding the Statement of Cash Flows

A number of my recent postings have been related to definitions of financial terms, financial ratios, and how to make use of them. Among these, a large percentage related to cash and the various things that impact it. In my posting Cash Management-It’s Not About the Cash Account I pointed that to manage cash we needed to get away from focusing so much on the cash account. To understand how cash is generated and used, let’s take a look at the flow of activity that impacts the cash balance. Understanding the statement of cash flows will help accomplish that. Read the rest of this entry »

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Some Key Financial Indicators

If you are attempting to manage a business you must have timely and meaningful financial indicators. Many companies do this with some sort of financial dashboard, but whatever your method, here are a few things to be on top of.

Some Balance Sheet Data

Keep up with some key balance sheet data. This should be done at a minimum monthly, but preferably weekly or even daily, depending on the particular piece of information. Here are some of the key financial indicators to track: Read the rest of this entry »

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5 Tips About the Income Statement

I’m amazed at how often someone looks at their company’s income statement and immediately zeroes in on the bottom line; the net profit. Of course, the net profit is important, but if you stop there you will miss some useful information that can be obtained from this statement. Here are 5 tips about the income statement.

Patterns and Trends

It helps to dig into the individual lines on the income statement. For example, suppose you are a distributor. Take a look at Read the rest of this entry »

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Balanced Approach to Financial Management

I remember a partner in a small CPA firm telling a story from early in his career. He said he had been given the task of creating a balance sheet for a client. When it was in balance he declared, “It balances, so it must be correct.” Of course the balance sheet must balance, but he quickly learned there was a lot more to it than that.

Balance Does Matter

One of the first areas where a company often displays a lack of balance is on the importance of the different financial statements. The income statement shows the results of activities over a specific period of time, while the Read the rest of this entry »

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