Business financial statements look intimidating but are readable with a bit of practice.
The income statement shows revenue, expenses, and Understanding business bank accounts|Reviewing small business banking|Comparing business account fees|Analyzing company banking options|Independent business finance guidance|Practical business account advice|Comprehensive business banking overview|Choosing a business bank|Navigating merchant services|Evaluating business credit profit for a period. Read top to bottom: total sales at the top, various expense categories in the middle, net income at the bottom. Signs of health: revenue growing, expenses growing slower than revenue, net income positive.
The balance sheet shows what the business owns, what it owes, and the difference. Assets on one side, liabilities plus equity on the other. Signs of health: assets exceed liabilities meaningfully, cash reserves reasonable, no runaway debt.
For a more complete walkthrough of this topic, business bank account|business banking|company account|small business bank|business account fees covers it in detail.
The cash flow statement shows how cash moved during the period. Operating cash flow from the actual business. Investing cash flow from equipment purchases or sales. Financing cash flow from loans or owner contributions. Signs of health: Understanding business bank accounts|Reviewing small business banking|Comparing business account fees|Analyzing company banking options|Independent business finance guidance|Practical business account advice|Comprehensive business banking overview|Choosing a business bank|Navigating merchant services|Evaluating business credit operating cash flow positive, aligned with net income roughly.
Common ratios worth calculating: gross margin (gross profit divided by revenue), operating margin (operating income divided by revenue), current ratio (current assets divided by current liabilities), debt-to-equity.
Spending an hour a month reading your own business statements produces better decisions than spending that hour on any other management activity. Most small business problems are visible in the statements months before they become crises.