Being a business owner does not mean having a degree in accountancy or business management. While these subjects can certainly benefit you, the truth is that most business owners do not have expertise in the financial management area. Most business owners rely on outside advisors to help determine how their company is performing and how it should move forward. Your company needs to have quarterly financial statements analyzed because it will give you a more in-depth look at the progress made by your operation.
What is a Financial Statement?
Financial statements are a way that businesses measure the performance of their operation. It provides a glimpse at the state of your finances and helps you determine if you are heading in the right direction. In this report, all pertinent financial information will be lined up, examined, and analyzed. This report will tell you whether your company is losing money or making a profit.
How to Analyze a Quarterly Financial Statement
Below is a summary of the step-by-step process required to analyze a quarter’s financial statements.
1. Project cash flow in the form of your company’s income statement in dollars. You will use this figure to compare your company with the total income or operating expenses you can expect over the next three months from each source of revenue and expense.
Predict income and expenses for the following three months by understanding cash flow from all sources.
2. Balance the income statement by adding depreciation, rent, interest, and other non-cash items. Determine cash flow by subtracting the non-cash expenses from the gross income.
3. Determine net income or loss by subtracting your expenses from your cash flow.
This will help you can determine net income or loss for the quarter.
How to Read a Quarterly Financial Statement
Work with your bookkeeper or accountant to analyze your company’s financial statements. If you are a business owner, read through these documents and begin to understand where you stand in comparison to the past, and learn how you can improve your financial standing.
Reading financial statements is not as difficult as one might think. While it does present a lot of information, the information contained within each financial statement is not difficult to decipher. You must understand how these statements are typically presented to understand better what you are looking at.
Analyzing and reading financial statements is essential for businesses because it shows your company’s financial health. You must prepare for the future by reading and understanding these statements. At AZON Bookkeeping, we can help you understand each statement and how your company’s financial standing compares to similar companies in the same industry. Book with us today to discuss ways we can help you succeed.