Financial planning resource is the process of casting a vision for your financial future. It includes budgeting, savings, debt management, and investment planning. It also focuses on education funding, retirement, and estate planning.
A budget is a crucial component of a financial plan that can help you cut expenses. It includes a record of what you own and owe and the timing of income and expenses.
Cash flow statement
The cash flow statement is an important financial document that compiles the company’s inflow and outflow of actual cash (or cash-like assets) for a specified period. It is one of the primary documents a company must produce to meet GAAP standards. It can be divided into three sections: cash flows from operating, investing, and financing activities.
The first section of a cash flow statement shows the money coming into your business from sales, inventory transactions, and other income. This can include non-cash items such as depreciation, amortization, and prepaid expenses.
The second section of a cash flow statement includes investment activity, such as buying and selling long-term assets. This can also include financing activities, such as loan repayments, the issuance of stock, and dividend payments. A negative number in this section can indicate that you need to generate more revenue to cover your expenses.
A balance sheet is a snapshot of a business’s financial health at a particular time. It discloses what a company owns (assets) and what it owes (liabilities). It also includes the owner’s residual interest and shareholder equity. Investors, analysts, and regulators use a balance sheet to assess a company’s liquidity and solvency.
The balance sheet is typically divided into several categories: current assets (such as cash and cash equivalents, marketable securities, inventory, and accounts receivable) and non-current assets (such as fixed assets, equipment, and prepaid expenses). It also lists the company’s liabilities, which include current account payables, notes payable due within a year, and the current maturities of long-term debt. In addition, it consists of the current portion of retained earnings, which is a sum of net income that a company decides to keep rather than distribute to shareholders as dividends. This is a good indicator of a company’s ability to pay its short-term obligations.
A company’s income statement showcases its revenue and expenses for a particular reporting period. It is used to track and forecast business growth, and comparing results from previous periods is vital to see how well a strategy works.
It also helps companies calculate profitability ratios, such as gross margin, which measures the percentage of sales profit after expenses are subtracted from revenue. Businesses use these ratios to benchmark their performance against competitors and identify trends over time.
For example, a company might increase profits by cutting costs or raising revenues. An income statement can help them determine which strategies are more effective. It can also help them determine how much to invest in their operations. Therefore, preparing an income statement regularly and distributing it to internal and external stakeholders is essential. Most businesses today prepare their income statements with accounting software, but creating them manually is possible.
Statement of cash flows
The statement of cash flows (sometimes called the cash flow budget) summarizes cash activity for a period. It is a historical document but can also be used to project future cash flows. It is similar to the income statement but focuses on cash instead of earnings and expenses.
It consists of three sections: operating activities, investing activities, and financing activities. The cash coming in and going out for each team is added to yield the total change in cash. The report can help identify any periods of cash deficit, which can be addressed through a plan to shift revenue or expense items to different periods.
A good cash flow statement can help a business maintain optimal working capital. This is especially important for new companies seeking investments or loans, as lenders are likelier to trust a company with a clear financial plan and solid cash flow projections.