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AUDITING AND FINANCIAL REPORTS – Theory Tax Website
FINANCIAL REPORTS

FINANCIAL REPORTS

Financial statements are an important tool for management to have when making business decisions. The quality of the financial statements is critical for obvious reasons, but not so obvious is the process that must be used to develop accurate financial statements. We understand the process for developing these statements, and our staff is highly experienced in this work.

We understand the importance of these statements to you. While there are numerous benefits of having accurate and timely financial statements, we have identified below the 3 key benefits of financial statements.

Understanding the Financial Status of Your Business

The complete financial status of your business can be presented in a quality financial statement that is prepared by our staff working closely with your staff. The three main financial statements are the balance sheet, the income statement and the cash flow statement. The balance sheet reflects the owner’s equity after the liabilities are subtracted from the assets. The income statement which is also known as the profit and loss statement, shows the profit derived from income over a defined period of time. The cash flow statement is a valuable tool for showing if there is enough cash coming in to pay for the operations of the business. A cash flow can be projected out over several months.

Lenders Will Want to Review Your Financial Statements

Lenders will be able to assess the financial health of your business by examining the financial statements. Lenders will be looking for inventory turnover and the aging of receivables among other indicators. The percentage of profit on sales is an important piece of information for a lender. Lenders will be looking at the financial trends of your business, so it is important that this information beaccurate for you and lenders. They will also be looking at the growth in your equity.

Financial Statements Will Help Prepare a Budget and Make Financial Decisions.

Preparing a budget requires a good understanding of the financial picture for prior years. This is obtained by referring to the historical financial statements. Combined with a revenue forecast, the prior year’s expenses will help you prepare a budget. The financial statements will also help determine the important ratios that will reflect the health of the business and show the opportunities for improvement. The debt-to- equity ratio is important as is the inventory turnover ratio. The return on sales ratio and the sales to assets ratio are valuable tools.