Financial Statements

Without financial statements, a business owner would have a difficult time measuring the success of the business in any meaningful way. Just as a visit to your doctor for a physical exam gives you information about the condition of your health, financial statements give you an idea of the overall financial condition of your business in both the short and long term. In the financial statements we prepare for you, we present all the relevant financial information of your business enterprise in an easy-to-read format that is also easy to understand.

At your request, we prepare four basic financial statements:

1. Balance sheet: This is the statement of financial position or condition, and it reports on your company's assets, liabilities, and net equity at a given point in time.
2. Income statement: This is your Profit and Loss statement (or a "P&L"). The P&L statement reports on your company's income, expenses, and profits over a period of time.
3. Statement of retained earnings or Statement of shareholders’ equity (for a corporation): This statement explains the changes in your company's retained earnings over the reporting period.
4. Statement of cash flows: This statement reports on your company's cash flow, particularly its operating, investing and financing activities.
5. For very complex statements, usually for large corporations, an extensive set of notes is included with discussion and analysis of each item on the statements.

Balance Sheet

What are your assets and liabilities?

Anything in your business that has value and can be sold or used are assets. They can include physical buildings, trucks, equipment, inventory, and cash, or intellectual property like trademarks and patents.

The monies you owe to other entities are your liabilities. This can include loans, rents, money owed for materials, payroll, taxes and more.  A liability can also be an obligation to provide goods or services to customers in the future.

Your net equity is your net worth. If you sold all of your company’s assets and paid all your liabilities, what is left is your net equity.

A balance sheet is essentially a snapshot of your company’s assets, liabilities and shareholders’ equity at the end of the reporting period.

Sample Balance Sheet:

Source: http://www.dfat.gov.au/dept/annual_reports/06_07/_lib/img/fins/balance_sheet.gif

Income Statements

To illustrate the revenue your company earned over a specific time, like a year or a portion of a year, we prepare an income statement.  This statement also shows the costs and expenses associated with earning that revenue. The last line of this statement is the “bottom line” you hear mentioned at board meetings.  It tells you if your business is profitable or not. Earnings per share (EPS) is the result of a calculation of what money shareholders would receive if the company distributed all of the net earnings for the period rather than reinvest these earnings. To calculate EPS, divide the total net income by the number of outstanding shares of the company.

Cash Flow Statements

A company’s inflows and outflows of cash are reported in the Cash Flow Statement. While your income statement tells you if your company is profitable, the cash flow statement reports if the company generated cash by showing changes over time. The activities reported in the Cash Flow Statements include operating, investing and financing.

Although the statements we prepare are easy to read and use, the complexity is inherent in the affect one statement or one calculation has on all of the other items included in the financial analysis.  Any 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 are related to net income shown on the income statement. We provide a complete analysis through the use of all of these financial statements, and when these are combined and explained sufficiently, you have a powerful tool and guide for investing in the future growth of your business.