Financial
Statements

Financial Statements

Investors need to know how a company is doing financially before they decide to invest – or not. Your Financial Statements  need to give an investor an overview of the profitability, potential for growth, strengths, and weaknesses in your business. Here are 4 Ways to Improve Your Financial Statements.

1. Consider the format of your financial statements.

Providing investors with easy-to-read financial information in the financial statements is essential to achieving your objective of capable, confident, and well-informed investors.

2. Make sure to include an operating and non-operating presentation.

It is important to consider the effects of both operating and non-operating components of the income statement.

3. Review peer organizations’ financial statements for best practices.

A review of other organizations’ financial statements is a great place to start when updating your own.

4. Modify your footnotes.

Financial statements are easier to read and understand when you identify what information is relevant to your investors, prioritize it appropriately, and present it in a clear and simple manner. In some cases, this includes additional information that is useful for investors and, in other cases, removing information that is immaterial.

Financial statements are intended to provide investors with information that is useful for making investment decisions. These statements need to be updated annually and should be prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

What Should Your Financial Statements Include?

There are different types of financial statements that you will need to prepare, including a balance sheet, income statement, and statement of cash flows.

The Balance Sheet

The balance sheet will tell an investor how your business funds assets, which can be through a liability such as debt or stakeholders’ equity or such as extra capital that was paid to your business or retained earnings. The liabilities that you will need to list in your balance sheet include debt, rent, tax, utilities, payroll, and dividends payable.

• Assets = (Liabilities + Owner’s equity)

The Income Statement

Some of the types of revenue that you will include in your income statement include interest that your business earns on cash that is in the bank, income from strategic partnerships, income from advertisement displays that are on your property, and rental income from property, for example.

•Net Income = (Revenue – Expenses)

The Statement of Cash Flow

The statement of cash flow shows how your company is managing the inflow and outflow of cash within the business. There isn’t a formula to calculate a cash flow statement, but there are three sections that report the cash flow into your business, namely:

• Operating activities,

• Investing activities, and

• Financing activities.