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Understanding Your Financial Statements

One of the primary benefits of working with an Accountant or CFO is the analyzation of your Financial Statements.

What are Financial Statements? Three statements that help improve your financial modeling and financial success.

There are three financial statements:

(1) the Income Statement

(2) the Balance Sheet

(3) the Cash Flow Statement

Financial models use the trends in these statements, as well as the trend between periods with past data to forecast future performance. Each statement serves a different and important role into your financial wellness and growth.

Income statement Key features:

  • Shows the revenues and expenses of a business

  • Expressed over a period of time

  • Uses accounting principles such as matching and accruals to represent figures

  • Used to assess profitability

Balance sheet Key features:

  • Shows the financial position of a business

  • Expressed as a “snapshot” or financial picture of the company at a specified point in time

  • Has three sections: assets, liabilities, and shareholders equity

  • Assets = Liabilities + Shareholders Equity

Cash flow statement Key features:

  • Shows the increases and decreases in cash

  • Expressed over a period of time, an accounting period

  • Undoes all accounting principles to show pure cash movements

  • Has three sections: cash from operations, cash used in investing, and cash from financing

  • Shows the net change in the cash balance from start to end of the period

The preparation and presentation of this information can become quite complicated. As stated above, this is one of the primary benefits of working with an Accountant or CFO as they can advise you on your financial future and help guide you with informed decisions to support your growth. If you are looking for this service, WATT can help. Book a consultation with us today.

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