A recent article titled 3 Key Questions Small Business Owners Must Answer, or Risk Failure by Dawn Fotopulos discusses three important questions that any business owner ought to answer. Here are the following queries and corresponding statements that support them
1.Do you invest or waste your economic resources? – See Balance Sheet
The very reason you are engaged in a business is to build terminal value or increase your investments. The terminal value is the present value of your business at a given time when you decide to sell it or whether to continue or stop the endeavor. Your assets should always be much greater than your liabilities otherwise you are on the verge of failure.
Balance sheet shows the business financial position as of a specific period. This document is the gauge on how you manage your business well. Your balance sheet is crucial; it measures your assets, liabilities and owner’s equity, or net worth of the business. It’s not the only measure of value, but it holds essential information every banker and investor wants to know. It’s the first step in determining terminal value.
2.Do you Yield Profit? – See Income Statement
Income Statement or Statement of Profit and Loss helps evaluate the business performance at a given time. Net Profit is measured after all business expenses like rent paid to day offices are deducted from net sales (exclusive of discounts and returns).
You are making profit when the calculation yields positive figures; you generate revenue at a lesser cost. But wait, this does not mean that your business is stable in shared office space. The next thing you need to know is your liquidity.
3.What is Your Cash Position? – See Cash flow Statement
Cash is the very essence of your business at the full service virtual offices. Paying bills with cash coming from your business operation not debt shows your financial stability. Remember, cash is to your business as blood is to your body; without it, your business ceases. Cash derives when clients pay. Sometimes there’s a time difference between completing a sales transaction and getting paid – this is sales on account. Thus proper management is required on receivables.
Cash Flow Statement determines your liquidity or cash adequacy to cover your business expenditures. However, decline in cash does not always indicate poor business operation but can be attributed to acquisition of new executive office space or refinancing of loan.
Learn and understand your financial statements assist you optimize your business at The Smarter Way To Office. Whether you are a small business owner or a large enterprise, everything you need to optimize your business performance is right here – from day one. Your workplace comes complete with furniture, telephone lines and equipment, secure high-speed Internet access and a world-class business support team.