Fundamentals of Financial Statements: It's easier than you think
Format: PDF / Kindle (mobi) / ePub
A book for non-finance managers who want to learn the language of business - the numbers. The book is a jargon free, layman's way of explaining financial statements in a user-friendly manner.
interest. Do you think Nick would say yes? Definitely he will say no. Now Harry again comes to Nick and this time he offers to pay 10% interest. Do you think Nick would say yes? Nick would definitely say No, simply because it is costing him 10%. Nick may say yes if Harry offers to pay him 15 – 20% interest. During my research, I was surprised and shocked to find out many business owners were actually giving the $1,000 for less than 10%. Whenever I share this fact, people ask
Using OPM i.e. other people’s money, company ‘B’ has got more earnings per share than company ‘A’. Please try to understand that Owner’s money is the most expensive source of money. Owners’ money is not free. It is not a gift! This is why I suggest my clients to use OPM. Before borrowing from an outside source consult your financial advisor or other consultants and learn how it would benefit your business. Try and learn to borrow at a low-interest rate so that you could make more return
This is the reason you pay them. Once the financial statements are ready you should read and understand them for insights as to whether your business is making a profit or not. You should know how much money is made and how much is spent. In Chapter 3 we learnt that profit does not always mean money. So you should know how much profit the business made and how much money you can take out of the business. This will help you to make informed profitable business decisions.
can be converted to cash liquidity, 38- free flowing Loan, 23- borrowing with an intention to return Operating Cash-Flow, 40- money spent on everyday workings Operating Expenses, 155- unavaidable expenditures Performing Assets, 82- anything/anyone contributing in cash generation Profit, 54- income more than expenditure Reserves & Surplus, 92- profit belonging to owners but retained by the company Share Capital, 92- money invested by owners
Furniture. Both of them are owners now. To start up business, money is required. For this example, let us assume the investment required to start this business is $100,000. When a business needs money, it borrows. First it borrows from owners. Yes, you read it right; a business first borrows money from owners. It is very important to understand this point as most people get confused. In accounting, owners and the businesses are treated separately. You are not your business. In this case