Hello, everyone.
I'm Astrid Daniella Galvez,
as a fellow business owner.
I'm passionate about helping other small businesses succeed.
That's why I've partnered with Quickbooks on this video
series to guide you through some basic business fundamentals.
In this video, we'll unravel the mysteries of financial statements
and help you assess how your business profits.
If your more of a reader, check out the link in the description.
Before we get to the bottom line, give this video
a thumbs up and subscribe to the Quickbooks channel.
It's an excellent source for more informative videos just like this one.
A financial statement.
It's like a health check for your business.
It gives a good picture of whether you're making profit or heading toward trouble.
That's why you should pay close attention to what these statements
tell you about your business.
So what makes up the business's financial statement?
Basically, there are three parts,
the balance sheet, the income statement sometimes called
a profit and loss statement and the cash flow statement.
These three items are significant because they give a picture
of your business's financial performance.
They show your business's economic resources and obligations
along with its earning capacity and potential cash flows.
Most importantly, a financial statement gives you the information you need
to make smarter business decisions.
Let's look at the three elements
that make up the financial statements, starting with the balance sheet.
The balance sheet highlights the assets of your business.
These include the value of inventory vehicles and equipment,
as well as intangible assets such as copyrights and trademarks.
Counter to that are your liabilities.
This is the money your company may owe to suppliers
or debt, such as bank loans.
The difference between the two is known as the business's equity or net worth.
Next, we have the income statement, the income statement shows
the business's revenue and expenses for a period of time.
More importantly, the income statement indicates
if your business is making profit breaking even or losing money
here, the expense of creating a product
or service is deducted from the revenue earned.
The difference is known as the net profit.
And the third element is the cash flow statement.
This statement is often overlooked, but it's crucial for your business.
It shows all the cash flowing into your business as revenue
and all the cash flowing out as expenses.
The cash balance at the end of the accounting period
will equal that on the balance sheet.
And if you'd like to dove deeper into balance sheets, income statements
and cash flow statements, check out the detailed guides on each of them.
Reading your financial statements carefully can help you flag
potential problems early on. So you can fix them.
It's a good idea to keep an eye out.
For a rising debt to equity ratio over
100 percent is cause for concern,
because that indicates that your business is taking more debt than it can handle.
Also, if you see a decline in revenue, you may need to think about cutting cost.
Check out the guide about reducing operating expenses for tips.
Beware of large expenses hidden.
And the other liabilities on the balance sheet
other indicates that the expense isn't significant enough
to be broken into it's own line and it should be reserved for small expenses.
Don't forget, when using cookbooks,
you can find all of your financial statements in the report section.
Now you can consider
mental math and multiple spreadsheets a thing of the past.
A Quckbooks live bookkeeper can also take bookkeeping
tasks off your plate so you can focus on running your business.
If you found this video helpful, don't forget to hit that like button
and subscribe to the Quickbooks Channel for more content like this.
Now keep calm and finance on.