The Business Owner's Guide to Reading and Understanding Financial Statements E-Book

Lita Epstein

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2012

Seitenzahl: 209

Beschreibung

Financial statements hold the key to a company's fiscal health--so learn to read them! In order to gauge a company's health--as well as the competition's--managers must know how to properly read and understand financial statements. The Business Owner's Guide to Reading and Understanding Financial Statements will introduce managers and business owners to various types of financial statements and explain why they are important. Serving as a desktop reference, especially for managers without a strong background in finance, this book will discuss the difference between internal and external financial statements and explain how they can be used for financial decision-making in order to avoid common missteps. Whether you're planning for major capital projects or simply managing the fiscal aspects of your department, this nontechnical, results-driven guide will arm you with the fundamentals to: * Understand the budget process and why it is important * Manage assets and track inventory * Gauge profitability * Monitor success throughout the year using internal reporting * Set prices and make key cost decisions Financial statements are essential to determining a company's fiscal health. Understand where your company stands so that you can make informed decisions about its future.

Leseprobe

Contents

Preface

Acknowledgments

Part I: Using External Reports to Gauge Your Company’s Health and Competitive Status

Chapter 1: The Key Financial Statements and Their Starring Role

Who Reads the Reports?

Are Your Business’s Financial Reports Private or Public?

Filling the GAAP

Why Accounting Method Matters to Your Bottom Line

Deciphering Double-Entry Accounting

Your Company’s Financial Road Map

Income Statement Accounts

Takeaways

Chapter 2: Balancing the Books: Your Assets and Liabilities

Rules Behind the Balance Sheet

Exposing Your Assets

Liabilities—Things Your Company Owes

Navigating the Equity Maze

Testing Liquidity

Takeaways

Chapter 3: Gauging Profitability

Understanding the Rules

Recognizing Revenue: Not As Simple As It Seems

Tracking Cost of Goods or Services Sold

Why Gross Profit is Important

Acknowledging Expenses

Testing Profitability

Takeaways

Chapter 4: Cash Is King

Key Sections of A Statement of Cash Flows

Formatting the Statement

Reviewing Investing and Financing Activities

Looking Behind the Numbers For Operating Activities

Bottom Line: Cash Flow From Operating Activities

Impact of Investing Activities on Cash

Eyeing the Impact of Financing Activities

Special Activities That Impact Cash

The Bottom Line

Testing Your Cash Flow Position

Takeaways

Part II: Using Internal Reporting to Manage Your Profits and Your Costs

Chapter 5: Why Budgeting Is Important

Who Should Be Involved in the Budgeting Process?

Starting With A Sales Forecast

Determining Your Cost of Goods or Services Sold

Tackling Expenses

Reviewing Cash Needs

Tracking Your Success Through the Year

Takeaways

Chapter 6: Managing Inventory

Understanding Inventory Valuation

Calculating Inventory and Cost of Goods Sold

Comparing Inventory Valuation Methods

Testing Your Inventory Turnover

Borrowing Against Inventory

Takeaways

Chapter 7: Monitoring Customer Collections

What is Accounts Receivable?

Calculating the Accounts Receivable Turnover

Digging Into Accounts Receivable

Developing Accounts Receivable Policies

Borrowing On Receivables

Takeaways

Chapter 8: Discounts and Special Pricing

Discount or Special Price

Tracking the Impact of Discounts On Your Bottom Line

Special Pricing: Pro or Con?

Takeaways

Chapter 9: Getting a Handle on Manufacturing Costs

Determining Cost of Goods Sold in Manufacturing

Inventory Value in A Manufacturing Environment

Exploring Fixed Versus Variable Costs

Special Pricing Deals and Manufacturing

Calculating the Impact of Lower Prices

Takeaways

Chapter 10: Reducing Bill Payouts

Your Bill-Paying Turnover

Evaluating Bill Payment Discount Offers

Delaying Bill Payment

Takeaways

Conclusion: Using Financial Statements for Decision Making

About the Author

Index

Copyright © 2012 by Lita Epstein. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Epstein, Lita.

The business owner’s guide to reading and understanding financial statements : how to budget, forecast, and monitor cash flow for better decision making / Lita Epstein.

p. cm.

Includes index.

ISBN 978-1-118-14351-3 (paper); ISBN 978-1-118-22558-5 (ebk); ISBN 978-1-118-23109-8 (ebk); ISBN 978-1-118-23112-8 (ebk)

1. Cash flow. 2. Decision making. 3. Financial statements. 4. Corporations—Finance. I. Title.

HF5681.C28E67 2012

658.15'12—dc23

2011038806

To my father,

Jerome Kirschbrown,

an auditor and a savings-and-loan examiner,

who helped me hone my financial skills

and taught me to use those skills

to improve a business’s bottom line.

Preface

Most small-business owners become very familiar with the income statement, which you may also know as the profit and loss statement, statement of operations, statement of earnings, or statement of operating results. Whatever you call it, this statement gives you a summary of the financial results of your business’s operations over a certain period of time.

The bottom line of the income statement can be a net profit or a net loss. As long as the bottom line shows a profit and the overall trend is upward, many business owners are happy to receive this detail from their accountant and then go back to running their business.

Are business owners doing enough? With the U.S. Small Business Administration concluding that the five-year survival rate for new businesses is just over 50 percent, clearly this information combined with a business owner’s experience is not enough for about half of all new business owners.