11/25/2025
Do you know your basic financial statements?
Many businesses only glance at their Profit & Loss statement. But that is ONE piece to the financial story of your business.
The four basic statements you should become familiar with are:
Income Statement (Profit & Loss) – Within a range of time, this simple statement shows you how much you made in sales, what you spent, and whether you made a net profit or loss
Balance Sheet (Statement of Financial Position) – Think of this report as a snapshot at a single point in time. It lists the assets used by the business to generate sales, what vendors you owe money to who have claim on those assets, and any equity you have in the business after you satisfy those liabilities
Statement of Cash Flows – Often ignored, but incredibly important, this statement shows you how you’ve used cash in your operations day to day, where you’ve invested cash, and helps you understand HOW and WHERE you’re spending the cash coming in and out of the business
Statement of Owner's Equity – This one often gets skipped, but it helps you see how your ownership in the business is changing over time. It shows your beginning equity, what you added, what you took out, and how your profit or loss changed that balance over a period of time
When you start to understand how these four statements connect, you stop guessing and start making decisions based on what’s actually happening in your business
