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Table of Contents:
00:00 - Introduction
00:55 - What are the three financial statements?
02:44 - How to create a balance sheet
05:13 - What does the income statement include?
07:14 - How to calculate cash flow
09:01 - What are the key financial ratios?
09:54 - Conclusion
It’s not enough to just claim that your company is doing well, you’ve got to have the numbers to show for it. While key success metrics can hook the interest of shareholders, most serious professionals need to see these numbers formalized into financial statements. The three financial statements model - which includes the balance sheet, the income statement, and the cash flow statement - remains as the tried-and-true representation of financial data across all industries. This trio of financial statements not only allows executive leaders and shareholders to peer into a company’s performance, but also uncovers the story and reasons behind those numbers.
The general protocol for financial statements and their formatting are designed to ensure clarity, consistency, and comparability across different periods and entities. This adherence to structure makes financial statements a credible way to present a company’s performance. Financial statements are also a requirement in companies’ annual 10-K filings to the SEC.
The balance sheet discloses a company's assets and obligations at a glance and gives a clear view of its financial standing at any given moment. This allows stakeholders to assess the company's ability to meet its short-term obligations and its financial leverage. The income statement details the company's revenues, expenses, and profits over a given period, highlighting its operational efficiency and profitability. This statement shows how well the company generates revenue from its operations and manages its expenses. Finally, the cash flow statement traces the single thread that runs through every business success - liquidity. This statement can be used to assess the company's liquidity and its ability to generate cash to fund operations, invest in growth, and return value to shareholders. Tying it all together are the financial ratios. They provide sharper insight into the company's financial health when it comes to areas such as liquidity, solvency, and profitability.
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2 апр 2024
