Tags |
|
|
Links |
|
|
Casual Articles - Reading Your Financial Statements: What Every Entrepreneur Must Know
I bought a second pair of reading glasses from my local Optician recently. I need this pair to help me find the first pair which inevitably go missing. While in the Opticians I remember thinking that I needed to buy some solution and some of those tissues for cleaning my mucky glasses.However, when it came to the point of paying for my new glasses the cleaning stuff went right out of my head. So why didn't the Optician or his assistant ask me - "Is there anything else you need today?" or even - "Do you need any cleaner for your glasses?" Perhaps they didn'
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, yo
Despite what many people may say, a job search does not have to be an unpleasant experience. There are those people who choose to take charge of the process, who actually find the process to be very rewarding and stimulating. Conducting a job search is in many ways a self discovery process and an opportunity to put your true endurance and attitude skills to the test.Here is the secret to experiencing job search success: Be Productive, Be Proactive, Be Positive, Be Persistent, and Be Polished. It is a very easy formula to follow: Do your homework on what you want to
Knowing how to do this is an essential skill not just for entrepreneurs but for everyone. However, for the entrepreneur having this skill can mean the difference between having a thriving business that continues to thrive and winding up in bankruptcy. The annals of the bankruptcy courts are strewn with cases of entrepreneurs who entrusted their accounting to others and, not knowing how to read the financial statements of their own businesses, were surprised when they found that the business was ultimately unsustainable. The purpose of this article is to help prevent this from happening to you--and to arm you with the skills you need to structure your business to your benefit from the outset.
Your Two Major Financial Statements
There are two major financial statements that every entrepreneur should know how to read and (ideally) prepare or have prepared in their financial software (we recommend QuickBooks):
The Income Statement
The Income Statement (also known as the P&L or Profit and Loss Statement) offers a dynamic picture of the ebb and flow of your finances. Briefly, income statement shows first: A. Your various sources of income Then subtracts from that, B. Your expenses To give you the net result: Net Profit or Loss Typically, it is the result shown on this statement that is the basis for your taxation by state and federal authorities at the end of the year. The net income or loss (revenue outgo) is carried over onto your second major financial statement: The Balance Sheet.
The Balance Sheet
Offers you a snapshot of cumulative results of your financial activities. It is made up of two columns:
On the left side you have your Assets
On the right are listed your Liabilities and Owners/Shareholders Equity (or ownership in the business). The two columns must be in balance, which is why this is called a Balance Sheet.
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, you
Usually the defining moment for a small to mid size distributor or wholesaler is when they get a huge order from their best customer. It is not unusual for a large customer to place a few small test orders, and if everything works well, to follow up with a stream of massive orders. This is the kind of situation that can truly grow a company and help it reach the next level.However, this can also present a very significant challenge. Distributors and wholesalers usually buy the products from suppliers in order to re-sell them. And, suppliers always require to be pai
Your Two Major Financial Statements
There are two major financial statements that every entrepreneur should know how to read and (ideally) prepare or have prepared in their financial software (we recommend QuickBooks):
The Income Statement
The Income Statement (also known as the P&L or Profit and Loss Statement) offers a dynamic picture of the ebb and flow of your finances. Briefly, income statement shows first: A. Your various sources of income Then subtracts from that, B. Your expenses To give you the net result: Net Profit or Loss Typically, it is the result shown on this statement that is the basis for your taxation by state and federal authorities at the end of the year. The net income or loss (revenue outgo) is carried over onto your second major financial statement: The Balance Sheet.
The Balance Sheet
Offers you a snapshot of cumulative results of your financial activities. It is made up of two columns:
On the left side you have your Assets
On the right are listed your Liabilities and Owners/Shareholders Equity (or ownership in the business). The two columns must be in balance, which is why this is called a Balance Sheet.
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, yo
The interview starts at the time you have entered into the room. They form an opinion on you before you started answering their questions. You already judged by appearance, smile or your nervous look and posture.Once look back for your favorite lectures and teachers, you like their lectures and they are memorable because they are informative or they are animated. In the same way while you are answering in an interview be informative and animated , I doesn’t mean that you have to entertain the interviewer by playing jokes you have to express your views in an animate
Your Two Major Financial Statements
There are two major financial statements that every entrepreneur should know how to read and (ideally) prepare or have prepared in their financial software (we recommend QuickBooks):
The Income Statement
The Income Statement (also known as the P&L or Profit and Loss Statement) offers a dynamic picture of the ebb and flow of your finances. Briefly, income statement shows first: A. Your various sources of income Then subtracts from that, B. Your expenses To give you the net result: Net Profit or Loss Typically, it is the result shown on this statement that is the basis for your taxation by state and federal authorities at the end of the year. The net income or loss (revenue outgo) is carried over onto your second major financial statement: The Balance Sheet.
The Balance Sheet
Offers you a snapshot of cumulative results of your financial activities. It is made up of two columns:
On the left side you have your Assets
On the right are listed your Liabilities and Owners/Shareholders Equity (or ownership in the business). The two columns must be in balance, which is why this is called a Balance Sheet.
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, yo
Google adwords is one of the marketing or advertising tools for online business. This tool became more popular because it can give instant result to the users. It can be use to test drive your products or your website. But most of the users fail to implement the good campaign due to lack of the knowledge of running up the adwords campaign.The most problem that the user faced are poor CTR and high CPC cost. This two major factor that can kill the user before they learn what is the adwords all about. The factors that contribute to this two major problem are:
The Balance Sheet
Offers you a snapshot of cumulative results of your financial activities. It is made up of two columns:
On the left side you have your Assets
On the right are listed your Liabilities and Owners/Shareholders Equity (or ownership in the business). The two columns must be in balance, which is why this is called a Balance Sheet.
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, yo
Well a successful affiliate marketer friend of mine, and I'm talking someone who makes over $500 per day, admitted that he had done just that.In a 10-day trial he collected 100 subscribers per day from his existing website visitors. Based on industry figures that estimate a list is worth $1 per month per subscriber, he estimates that if he reckoned on 50 cents per subscriber per month he has just built a $500 per month money machine for nothing!! - As he is getting the visitors anyway.At 100 subscribers per day x 1000 days (the length of time he has been doi
Assets=Liabilities + Equity
It's really quite logical how the Income Statement and Balance Sheet relate to one another.
If you have to use current or long-term assets to pay ongoing expenses during the current year, at the end of the year, the amount of your assets will be reduced by the amount of net loss. On the right hand side, your Equity has gone down too. If you borrowed, say $10,000 to pay current operating expenses, at year end, your assets remain the same, but your liabilities have increased by $10,000, lowering your net Equity or ownership in the company by that same $10,000.
It doesn't take a rocket scientist to figure out that if you continue on this path, you will quickly be in a very painful situation, because Liabilities carry their own cost. The cost of borrowing money is Interest, and if you are fortunate enough to borrow at only 10% interest (on unsecured debt) today, a year from now, you will have to pay $11,000 to pay off the original $10,000 debt. This reduces your equity still further--unless you have used the borrowed funds to create more assets that increase in value at the same rate as the interest on your debt or, better yet--at a higher rate.
More to the point for deciding which business entities to use is that you need to work out both your personal financial statements and those of your business(es). If you find, for example, that that you have significant salary or wage income in your personal financial statements that is causing you to pay out high taxes (as reflected in your balance sheet), and you expect that your business will generate some significant losses for the first several years, it would be advantageous to you to use a business entity that is a flow-through entity. Losses incurred by your S-Corporation (or, if you prefer, your Limited Partnership or your Limited Liability Company) will flow onto your personal balance sheet to offset the salary or wage income and thus reduce your tax liability.
Moreover, in general, if you want to draw up a roadmap to getting where you want to go, you need to know your point of departure. Thus, preparing and understanding your personal and business financial statements is an indispensable first step for your business planning.
©Copyright Azur Pacific Associates 2006
HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.casualarticles.com/article/42728/casualarticles-Reading-Your-Financial-Statements-What-Every-Entrepreneur-Must-Know.html">Reading Your Financial Statements: What Every Entrepreneur Must Know</a>
BB link (for phorums):
[url=http://www.casualarticles.com/article/42728/casualarticles-Reading-Your-Financial-Statements-What-Every-Entrepreneur-Must-Know.html]Reading Your Financial Statements: What Every Entrepreneur Must Know[/url]
Related Articles:
Business to Business Marketing: The Secret to Rapid Expansion
First-Timers Tips For Networking Meetings
Bookmark it:
|