The Importance of Financial Projections and Statements
Business is about a lot more than the numbers, but all businesses need to eventually make enough money to cover their expenses and turn a profit to stay in business. Financial Statements usually consist of balance sheets, profit and loss statements, and cash flow statements and are meant to keep track of a company's financial well being. These statements can help companies determine whether they will have enough cash on hand to cover operating expenses, whether or not the company is on track to cover all of its expenses and turn a profit, and whether or not the company the company will need to make capital investments in things such as new equipment. All of these bits of information can help companies determine new pricing strategies or where too much money is being allocated. This information is necessary for seeking bank loans and other outside capital, and keeping good track of this information can also help you prevent your business from running into any tax or legal compliance issues.
Start ups that don't have any financial history also need to create financial projections by calculating its start up costs and using the same sheets that you would find in an established company's financial statements. In order to do this, a start up can project its future sales and use financial ratios compiled from other companies in the same industry or base their numbers on the financial statements of public companies. These numbers are especially important for start ups that are seeking outside capital through traditional lending sources or from private equity investors.
Video Courses on Understanding Business Finance
"The Entrepreneur's Guide to Financial Statements" in GVRL
Books and eBooks
There are also several books and eBooks in the Library Catalog that can help you better understand the finances of your business. Click the subject headings below to find titles on financial statements, balancing your books, pricing, cash flow, and more.