Question

be original and use your words .

Our topic this week is Understanding a Firm's Financial Statements.

What are the top 3 things you would look at in your financial statements to see if your business is successful and why?

Answer 1

To see the success of the business it is very important to look at the financial statements because they tell us what money has been put into the business, what has returned in form of revenues and what is the profit derived from the venture. These three figures tell us where our business stands in terms of growth, success and survival. Financial statements include many detailed statements having every minute transaction of any cash or credit activities of the business. Looking into every figure and transaction is time-consuming and won't give the exact results required. Hence to understand the business success through financial statements the three things we will look into profit the business made, what one owns and owes to other parties and the liquid cash the business possesses.

To see the profits of the year the income statement will be reviewed. It shows the income minus the expenses and hence the profits made during a certain period of time. The financial health of the business which indicates what the business owns as assets and what it owes to others as liabilities can be seen through the balance sheet of the financial statements. This also identifies our success and stand as a growing business. Lastly, the liquid cash which is required and can keep the business going ahead is important to analyse which can be seen through the cash flow statement. Hence these are the three things that should be seen in financial statements to analyse the success of any business.