Chapter 8 Deciphering and Presenting Your Financial Situation In This Chapter Understanding income statements, balance sheets, and cash-flow statements Looking into your financial future | H ii Chapter 8 Deciphering and Presenting Your Financial Situation In This Chapter Understanding income statements balance sheets and cash-flow statements Looking into your financial future ome people love adding and subtracting columns of numbers. And then there are the rest of us. Although this chapter is for everyone it s most of all for the vast group of people who are spreadsheet impaired and who wish that terms like income statement and balance sheet would just disappear or that someone would at least take away the mystery. Well you get half your wish. The discussion in this chapter helps you understand your business finances and all the jargon they involve. This chapter also makes you better at keeping an eye on your money plus it tells you how to examine your financial situation and gaze into the crystal ball to forecast your company s financial future. If you love numbers this chapter will be a breeze. If not it ll be a little more work but all the more worthwhile and necessary. Despite what you think if you re in business you re a numbers person like it or not. So bring out the calculators and get ready to talk finance Decoding Financial Terminology People hyperventilate when they hear the term financial statements as if someone just told them that the rest of the conversation would take place in an arcane foreign language with no translation assistance. H DD 152 Part II Developing Your Plan s Components Well here s good news. You can master the language of business finance by understanding three key terms Income statement This report summarizes how much money your business earned and spent up until the minute the report was run. It reports your revenues over a given period of time and then subtracts all the costs of doing business over that same period to arrive at your net profit. Income statements are also called earnings reports or profit-and-loss statements. Don t be confused they re all one and the same. Balance sheet This report captures a .
