Understanding financial statements is an important aspect in running a startup company, more so if the entrepreneur isn't from a commerce background, not adept in financial issues. These slides give a brief overview of the financial statements that

1. Understanding Financial
Statements
Finance

2. All the money your business
earns is not yours and all the
revenues do not belong to
your business. Why is this so?

3. Because of a business
accounting concept called
‘Separate Entity’.

4. According to this, business and
the owner is considered as two
separate entities. Due to this the
owner is entitled to a manager’s
salary and/or director’s salary.
The most of ownership is
represented by his/her
shareholding in the firm.

5. What are financial statements?
Accounting systems have emerged
to organize book-keeping. Financial
statements are an outcome of these
systems.
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6. Cash flow statement
• Reflects the financial activity over a period
of time and also changes occurred in the
balance sheet.
• This includes net cash flow from operating
activities, investment activities, financing
activities and net change in cash and
marketable securities..
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7. Income statement
• Drafted to determine the net profit of the
business which further reflects in the balance
sheet.
• It includes accounting categories like sales,
cost of goods sold, gross profit, operating
expenses, depreciation, operating profit,
income taxes and other operating
expenses.
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8. Balance Sheet
• Quick overview of the assets and liabilities of
a business.
• This statement speaks about different asset
and liability categories like current assets,
fixed assets, depreciation, current liabilities,
accounts payable, owner’s equity and so
on.
• This is representation of the transparency
and level of governance in the business
holdings.
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9. Other financial concepts an
entrepreneur should know.
Financial ratios to understand the
capital situation, cash flow situation,
break even analysis and debt situation
of the firm.
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