What are a financial statement and a balance sheet?
Author: Aidon Hughie Bilbao
Website: http://www.about-home-based-business.com
Added: Sat, Oct 28, 2006 9:49:23
Category: Home Based Business Questions
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A financial statement is a written report that quantitatively shows the financial health of a company. It is usually compiled quarterly and annually. There are three parts to a financial statement:
1. Balance sheet (see below).
2. Income statement, also called a Statement of Earnings, Revenue and Expenses or Profit and Loss Statement, which shows the sales, expenses, and profit (or loss) of the business.
3. Statement of cash flow, which shows variations in cash production and financial position.
Balance sheets are documents that list a business's assets and liabilities. It helps small business owners get the grip on the financial strengths and weaknesses of their business. It can also identify and evaluate trends, particularly in receivables and payables.
Balance sheets are divided into three major sections: (1) assets, (2) liabilities, and (3) capitalization or net worth, which is figured by subtracting liabilities from assets. If the liabilities are larger than the assets, then the balance will be negative and the capitalization will show as a net loss rather than a net worth. This will also indicate that the business is in financial trouble.
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Aidon "Hughie" Bilbao answers frequently asked home based business questions at PrettyGreatAnswers.com.
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