In my last blog post we discussed why you should read and analyze your Balance Sheet. Now we’ll discuss how to use it in your business. Each month you should compare your current Balance Sheet to the prior month and to the prior year the same month. How does the current Balance Sheet compare? Hopefully [...]

How often do you review your Balance Sheet? Is it monthly, quarterly, yearly or never? The Balance Sheet is the ugly stepsister to the Income Statement. Every business owner wants to know how much money they have in the bank. They may even review the Income Statement and perform ratio analysis to gain more information [...]

Once you have the Income Statement prepared, see The Income Statement: How to Read it post, it is time to compare your results from the current month to the prior month. Using the same logic, compare your current results to the same month of the prior year. In what areas did your business improve? What [...]

With any business, especially during challenging economic times, it is important to understand what the current ratio is and how to use it. The current ratio is considered a liquidity ratio which measures a company’s ability to pay short-term loans. The formula for this liquidity ratio is: current assets over current liabilities. The result of [...]

What does the term net worth mean? And why is it something a business owner should pay attention too? The actual definition of net worth is: total assets minus any total liabilities. Unfortunately, this is not helpful to those unfamiliar with accounting terminology. Let’s take a closer look at this. Net worth is a combination of money [...]

Debt is a word that many business owners do not want to use to describe their financial position, yet managing and monitoring debt is a task that small business owners tend to avoid. In general, debt that is due and payable within the next 12 months is called Current Liabilities. Paying these debts will probably [...]

Potential investors, lenders, stock holders, and business owners all like to know how well a company is doing financially. One way to determine the financial performance of a company is to review the Balance Sheet. The Balance Sheet is basically a snap shot of the items a company owns, owes and the difference between the [...]

Financial statements are intimidating so it is no surprise that many business owners do not even attempt to calculate financial ratios. Accounting and finance are two courses most students try to avoid or at least struggle to get through, especially when your instructors require you to memorize ratios. But, ratios can help you identify trends [...]