![]() The cash-flow statement is one of the most important documents for making management decisions. A good business manager can see possibilities for growth and efficiencies behind the numbers in the balance sheet. Simply by changing credit policies within the company and focusing on streamlining collections so that most receivables are resolved within 30 days, a million dollars can become available for operating capital without increasing sales or leveraging a line of credit. Examining the balance sheet, you discover that there are six weeks of sales sitting in accounts receivable. For example, assume you work for a company with $25 million in annual sales. The information in the balance sheet drives many business decisions. The business manager then evaluates the data to make operating decisions, such as whether the business is positioned to free up existing cash for operating expenses or needs to obtain additional credit. ![]() These documents are prepared according to generally accepted accounting principles and presented in a standardized format.įinancial statements are neutral they present an accurate picture of the activities of the business over a defined period. While there are some differences between nonprofit and for-profit entities, all businesses typically prepare these three most common financial statements - the balance sheet, the income statement, and the cash-flow statement. Familiarity with the basic types of financial statements and the ability to interpret the numbers behind them are essential to sound business decision-making. Good managers have many tools at their disposal to accomplish these goals, provided they have a good understanding of the company’s financial position. In today’s sometimes volatile economy, business managers are frequently asked to make process decisions that help the company’s capital work harder or to decrease overhead costs.
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