Tag Archives | Financial statements

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How to Classify Shareholder Advances to Their Companies

Owners of closely held businesses sometimes need to advance their companies money to bridge a temporary downturn or provide extra cash flow for an expansion, a major expense or other purposes. Should you categorize those advances as bona fide debt, additional paid-in capital or something in between? Under U.S. Generally Accepted Accounting Principles (GAAP), the […]

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Financial Statements Help Value Businesses

Owners of private businesses often wonder: How much is my business interest worth? Financial statements are a logical starting point for answering this question. Here’s an overview of how financial statements can serve as the basis for business valuation under the cost, income and market approaches. Cost approach Because the balance sheet identifies a company’s […]

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Do Your Financial Statements Contain Hidden Messages?

Over time, many business owners develop a sixth sense: They learn how to “read” a financial statement by computing financial ratios and comparing them to the company’s results over time and against those of competitors. Here are some key performance indicators (KPIs) that can help you benchmark your company’s performance in three critical areas. 1. […]

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How to Shape Up Your Working Capital

Working capital — current assets minus current liabilities — is a common measure of liquidity. High liquidity generally equates with low risk, but excessive amounts of cash tied up in working capital may detract from growth opportunities and other spending options, such as expanding to new markets, buying equipment and paying down debt. Here are […]

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Benchmarking Receivables

Accounts receivable represents a major asset for many companies. But how do your company’s receivables compare to others? Here’s the skinny on receivables ratios, including how they’re computed and sources of potential benchmarking data. Starting point A logical starting point for evaluating the quality of receivables is the days sales outstanding (DSO) ratio. This represents […]

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Financial Statements

3 Financial Statements You Should Know

Successful business people have a solid understanding of the three financial statements prepared under U.S. Generally Accepted Accounting Principles (GAAP). A complete set of financial statements helps stakeholders — including managers, investors and lenders — evaluate a company’s financial condition and results. Here’s an overview of each report. 1. Income statement The income statement (also […]

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5 Ways To Speed Up Collections

Turning receivables into cash is among the most important things a business must do. Of course, it’s easier said than done. Here are five ways to speed up collections: 1. Streamline the billing process. You can’t collect what you don’t bill. Invoice customers promptly — as soon as the product ships, if possible. Or, if […]

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