by Amanda King | Financial Reports
Benchmark and Understand Your Business’s Performance If you are looking for a way to analyze your own or your client’s company performance, you’ll need to first grasp a good understanding of how the business is performing comprehensively. IndustriusCFO’s Business Performance Scorecard is designed to provide a comprehensive benchmarking analysis of a company’s performance through Liquidity, Asset Efficiency and Profitability Key Performance Indicators (KPIs), including a Common Size Analysis. Watch our video tutorial on how to analyze your company’s performance using our Business Performance Scorecard Module: Key Features For each KPI, you’ll see six points of data conveyed in a user-friendly chart: one pertaining to your company and five from industry peers from the top 10%, 25%, 50%, bottom 25% and 10% of performers. You can detect financial weaknesses easily with the module’s color-coded benchmarking displays that graph your company’s performance and illustrate how you compare against industry peers. The Common Size analysis shows itemized Income Statement and Balance Sheet data alongside industry data, allowing for comparison and immediate detection of discrepancies with a variance analysis. Liquidity KPIs include: Current Ratio, Quick Ratio, Current Liabilities to Net Worth, Current Liabilities to Inventory, and Total Liabilities to Net Worth. Asset Efficiency KPIs include: Collection Period, Inventory Turnover, Assets to Sales, Sales to Net Working Capital, and Accounts Payable to Sales. And, Profitability KPIs include: Return on Sales, Return on Assets, Return on Investment, Profit per Employee, and Sales per Employee. The Benefits The Business Performance Scorecard helps you save time by allowing for quick and easy detection of financial weaknesses and strengths across Liquidity, Asset Efficiency and Profitability KPIs as well...
by Marianne Anderson | Financial Reports
Statement of Shareholder Equity The fourth financial statement, called a statement of shareholder equity shows how shares, total equity and ownership types have changed over time. It reconciles the activity in the equity section of the balance sheet from period-to-period. So when you see the “snap-shot” of a balance sheet from one year to the next and wondered how it changed, the changes are documented in the Statements of Shareholders’ Equity. The changes in shareholders’ equity represent company profits or losses, dividends and (or) stock issue. The specifics of Statements of Shareholder Equity can be extremely varied depending on the way any individual company is organized as it pertains to ownership, stock, preferred stock, paid-in-capital and how this capital is increased or diluted over time and explains what happened to cause any changes in Shareholders’ Equity. Want to REALLY dig into your numbers? Download our new eBook “Reading Financial Statements to Aid Business Decision-Making” right now! Yes, send me my eBook! Note: This statement is particularly important if you “own stock” in a company but do not have voting rights associated with that stock and therefore no control or say in the running of the business; particularly with respect to ownership, dilution of stock by issuing additional shares and so forth. Be sure you know your rights, before investing in the stock of a company. Fundamentals of Financial Statements, 4 Part Series The Balance Sheet The Income Statement The Cash Flow Statement Statement of Shareholders...
by Industrius CFO | Financial Reports
Do You Understand Your Cash Flow Statement? In many businesses, income and cash flow are not always the same, which leads to the need for a cash flow statement showing the exchange of money between a company and the outside world over a period. The cash flow statement reconciles opening balance of cash (as opposed to non-cash items such as credit sales) at the start of the period with the closing balance of cash at the end of a period. Managing the Cash Understanding cash management is critically important for a person running a business. One must be a good manager of cash to build a business successfully because cash is vital to the operation of every business. The final information one looks for in the cash flow statement is the net increase or decrease in cash for the period. This information is very important from a financial point of view. Financial analysts focus this information to judge the ability of a business to generate cash. The information is also of vital importance for the person in business because it tells him/her about their business’ liquidity strength. Want to REALLY dig into your numbers? Download our new eBook “Reading Financial Statements to Aid Business Decision-Making” right now! Yes, send me my eBook! The Cash Flow Statement Answers Several Questions for You The cash flow statement aids the businessperson to answer vital questions like: Where was money obtained? Where was money put and for what purpose? Additionally, the information contained in the cash flow statement is important to answer many critical questions, such as: Is my business growing, or simply...
by Industrius CFO | Financial Reports
Creating and Working with Your Balance Sheet A Balance Sheet is a statement showing the assets, liabilities and shareholders’ equity of a business. It provides detailed information in a specifically defined format. As the name implies, a balance sheet must be in balance – meaning: The total value of the assets must be the same as the combined total value of the liabilities and shareholder equity. In other words: BASIC BALANCE SHEET ACCOUNTING EQUATION assets = liabilities + shareholders’ equity Principle: A company’s assets must be equal to the sum of its liabilities and shareholders’ equity. A Balance Sheet portrays the financial position of a company by showing what the company owns at a specific point-in-time, like a snapshot. The point-in-time is the date stated in the heading of the Balance Sheet and every Balance Sheet is divided into the three sections it represents: Assets Liabilities Shareholder’s Equity By way of illustration, let’s look at some sample Balance Sheets: Balance Sheets can be laid-out either horizontally or vertically. A Horizontal Balance Sheet In a horizontal set up, the monetary value of left side is equal to the monetary value of right side. On the left side of the balance sheet, companies list their assets. On the right side, they list their liabilities and shareholders’ equity. In a vertical set up, the monetary value of the top portion is equal to the monetary value of the bottom portion. In the top portion of the balance sheet, companies list their assets. In the bottom portion, companies list their liabilities and shareholders’ equity. As you can see, the Balance Sheet is divided...
by Industrius CFO | Financial Reports
Understanding Your Income Statement An income statement is typically prepared at the end of a business period (such as a Fiscal Year or Quarter) to assess profit or loss. It can be thought of like a motion picture. It reports how a company performed during the period presented, and shows whether that company’s operations have resulted in a profit or loss. Therefore, it shows how much money a company made and spent over the period. The period is shown in the header of the income statement. To state this another way, it is a financial statement that shows how much revenue a company earned over a specific period (usually a year). An income statement also outlines the costs and expenses associated with earning that revenue. Typically, the final figure of this statement shows the company’s net earnings or losses. This tells you how much the company earned or lost over the period. Drawing an Income Statement To better understand how income statements are set up, it may be helpful to think of them as a set of stairs. We start at the top with the total amount of sales made during the accounting period. Then we will go down, one step at a time. At each step, we make a deduction for costs or expenses associated with corresponding revenue. This means that each step will bring a revenue and an expense pair, or an expense item into the picture. At the last step, after deducting all expenses, we will learn how much the company earned or lost during the period. People often call this “the bottom line.” It is...
by Industrius CFO | Financial Reports
The Fundamentals of Financial Statements In general, financial statements show you where a company’s money came from, where it went, and where it is now. For example, did it come from sales, investments, or loans? How was it spent? How much was spent, how much is available and how much is invested? Primarily, financial statements tell you where in your business your money is, so you can keep track of it and manage it effectively. For instance, through financial reports, you can see if your money invested in stock, trapped in non-performing fixed-assets or collecting dust in an outdated inventory. Want to REALLY dig into your numbers? Download our new eBook “Reading Financial Statements to Aid Business Decision-Making” right now! Yes, send me my eBook! Ultimately, well-organized, financial statements summarize what you need to know in a way that lets you quickly pick out key issues. A Balance Sheet, for instance, will clearly show an amount such as $100,000 is invested in overall plant assets as of a specific date (see illustration below). Some financial statements are governed by a legal framework with international standards of accounting and auditing, and are generally prepared by a professional accountant or tax accountant. However, these are not necessarily the financial statements that you need to run a business. Instead, financial reporting and statements, sometimes referred to as “management accounting” is what you need for business decision-making and is the primary focus of this book. Financial Statements – The Basics Fundamentally, the four main, standard financial statements and the type of information they provide are: Balance sheets – a company’s financial position (assets, liabilities and...
