Financial statements outline the financial status of your company. Monitoring the financial health of your business can mean the difference between failure and success. For example, properly scrutinizing financial statements will stop you from spending money that you do not have and also let you know when you can deploy funds to take your business to the next level.
There are three primary financial statements: the balance sheet, the income statement and the cash flow statement. The balance sheet demonstrates the basic accounting equation: Assets = Liabilities + Owner’s Equity. Assets include everything of value that a business owns or is owed, and liabilities are what a business owes. Owner’s equity — the balance left over after you subtract liabilities from assets — is the owner’s share of the business. The income statement shows the profitability, or lack thereof, of a business over a set period. The cash flow statement converts finances from accrual basis to cash basis and measures the flow of cash in and out of the business.
Because financial statements help you to see a snapshot of your company’s financial position, they are great decision-making tools. Financial statements show business trends, the rate at which you are collecting receivables, the rate at which you are paying creditors and any cash flow problems.
Accounts payables reports let you know what is owed to whom and when. You can also generate reports to let you know what your inventory levels are and the value of the inventory. You can generate a report to answer almost any question you have about your business that relates to what you own, what you owe and how much money your company makes. These are questions you need answered as you make strategic decisions on how to make your business successful.
Businesses need credit as a part of their strategy to remain financially viable. When businesses apply for business loans, business credit cards and credit terms with a vendor, the lender will ask to see a balance sheet and run your credit report to decide whether to loan you credit. A balance sheet will show a creditor how much debt you are carrying and how much money is flowing in and out of your business. You also need financial statements to calculate your tax obligations.
When you choose to work with the knowledgeable actuaries and consulting team at Mondelis, not only will you reap the benefits of working with a smaller firm, you will be paired with a partner who has an extensive background in corporate financial reporting related to pension and post-employment plans.
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