Understanding and Analyzing Financial Statements

All non-financial professionals are challenged in today's business environment to manage and ensure full and efficient utilization of limited resources to improve profits and productivity and achieve overall business success. This requires as a foundation the understanding & analysis of financial statements.

Financial transactions of a business are transformed through an accounting process into three key and required financial statements, they are:

• The balance sheet shows what the company owns minus what it owes and the resulting financial strength of the company
• The income Statement indicates the comparison of revenue earned from providing goods and services less the costs or expenses used to provide the goods and services. This resulting comparison is called profit or surplus
• Cash Flow Statement which indicates the company's sources and uses of funds

The ability to understand and analyze financial statements is key and relevant to making sound business decisions. One essential key is the understanding of the different terms, tools, and techniques used in the process of preparing these statements. Non-financial professionals find this a conflicting challenge and need a simple framework for understanding & analyzing these statements.