2. Financial statements will identify financial
strengths and weaknesses.
Financial statements are prepared to meet
external reporting obligations.
Three Are Listed:
The Balance Sheet
The Income Statement
The Cash Flow Statement
3. The position of your business is judged by it.
A balance statement is
showing a trading period stating all the
assets (owns) and liabilities (debts) that the
company owe.
Fixed Assets: Are assets that are permanent
use in the company.
4. Fixed Liabilities: These are the liabilities
which are payable immediately or in the near
future. These liabilities are payable after a
long period.
Current Liabilities: These are the
liabilities payable immediately or in the near
future.
5. Stockholder’s Equity: In the real sense,
ordinary shareholders are the real owners of
the company.
Formula of return on equity capital ratio is:
Return on Equity Capital =[(Net profit after
tax-Preference dividend)/Equity share
capital] x 100
6. Keep tabs on the money fueling your
business. Cash flow is a measure of the
amount of money your company makes and
spends during a given period.
Understanding your cash flow lets you
evaluate:
7. Borrowing needs
The timing of new hires and major purchases
The timing of payables
Product pricing and the amount of credit
granted to suppliers
The need to make strategic cost-reduction
decisions
