Financial statements are like the financial dashboard of your business. Financial statements are reports that summarize important financial accounting information about your business. There are three main types of financial statements: the balance sheet, income statement, and cash flow statement.

A balance sheet is a snapshot of your business finances as it currently stands. It tells you about the assets you own, and liabilities i. How often your bookkeeper prepares a balance sheet for you will depend on your business. Some businesses get daily or monthly financial statements, some prepare financial statements quarterly, and some only get a balance sheet once a year.

For example, banks move a lot of money, so they prepare a balance sheet every day. On the other hand, a small Etsy shop might only get a How To Look At Company Financials sheet every three months. But total assets can also include things like equipment, furniture, land, buildings, notes receivable, and even intangible property such as patents and goodwill. Liabilities are debts you owe to other people.

On our balance sheet example above, the only liability is a bank loan. But total liabilities can also include credit card debt, mortgages, and accrued expenses such as utilities, taxes, or wages owed to employees. Equity is the remaining value of the company after subtracting liabilities from assets.

This might be retained revenue—money the company has earned to date—as in the example above. This is a way some business owners choose to pay How To Look At Company Financials. To put it simply: Whatever value equity your business actually has consists of what it owns assets minus what it owes liabilities. It shows you how much you made revenue and how much you How To Look At Company Financials expenses. Cost of Goods Sold COGS Victory Life Insurance Company Topeka Kansas the total amount it cost you to make the popsicles: popsicle sticks, locally-sourced ingredients, etc.

When you subtract the COGS from revenue, you see just how profitable your products are. This is very useful. In the above example, the revenue is about 10x the COGS, which is a healthy gross profit margin. You could be making a killing on every popsicle, but spending so much on advertising that you walk away with nothing.

What else? There are two expenses here besides interest expense: electricity and maintenance. You get those from the balance sheet. But depending on how you do your financial reporting, you may need a third type of statement. The cash flow statement tells you how much cash entered and left your business over a particular time period.

Cash flow statements also known as the statement of cash flows are typically only prepared for companies that use the accrual accounting method.

Cash Flows from Operations. This is what you make and spend in the normal course of doing business. Cash Flow from Investing Activities. This is money you invest—in this How To Look At Company Financials, by purchasing new equipment for your business. Cash Flow from Financing Activities. This includes money the owner invested in the business, as well as taking out and repaying loans. The cash flow statement tells you how much cash you collected and paid out over the year.

In either case, your cash flow statement has shown you a different side of your business—the cash flow side, which is invisible How To Look At Company Financials your balance sheets and income statements. Once you get used to reading financial statements, they can actually be fun. One person can only serve so many popsicles. The line at your cart grows so long some days, people get frustrated and leave before they even buy one of your popsicles.

At this point, it may make sense to hire a 60th Ordnance Company seasonal employee and get a bigger cart. But you need a loan in order to do that. Finally, without properly prepared financial statements, filing your taxes can be a nightmare. By carefully collecting data and crunching the numbers, you can prepare your own financial statements.

An experienced bookkeeper can prepare your financial statements for you, so you can make smart financial decisions without all the tedious paperwork. Check out Bench. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions How To Look At Company Financials in reliance upon the information contained herein.

Sign up for a trial of Bench. No pressure, no credit card required. How it Works. For Accountants. Contents What are financial statements? The balance sheet Using the balance sheet in real life The income statement Using the income statement in real life The Global Drilling Company flow statement Using the cash flow statement in real life Using financial statements to grow your business Bottom line.

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