All non-financial professionals are challenged in today’s business environment to manage and ensure full and efficient utilization of limited resources to improve profits and productivity and achieve overall business success. This requires as a foundation the understanding & analyzing of financial statements. Financial transactions of a business are transformed through an accounting process to three key and required financial statements, they are:
Balance Sheet which shows what the company owns minus what it owes and the resulting financial strength of the company.
Income Statement which indicates the comparison of revenue earned from providing goods and services less the costs or expenses used to provide the goods and services. This resulting comparison is called profit or surplus
Cash Flow Statement which indicates the company’s sources and uses of funds
The ability to understand and analyze financial statements is key and relevant to making sound business decisions. One essential key is the understanding of the different terms, tools and techniques used in the process of preparing these statements. Non-financial professionals find this a conflicting challenge and need a simple framework for understanding & analyzing these statements.