Business people always evaluate financial statements in each period. Most of these financial reports are used to evaluate their business. Well, the middle of the year is the right time for you to do an evaluation, so you can immediately arrange improvements and the next work plan, to achieve the target at the end of the year.
Here are 4 stages that you can do in evaluating business finances to make it more advanced and growing:
Company Performance Evaluation
The first thing you can do is look at the income statement. You do this by looking at the information on the income statement such as the amount of profit/loss, details of income, and the number of expenses. Then, calculate and analyze financial ratios such as profitability, efficiency, ROI (return on investment), earnings per share and others.
In addition, from the income statement you can also assess the risks of your business. Look at the profit earned every month, quarterly, six months or from year to year. Make a graph and do a simple analysis, is the profit increasing or decreasing?
If it continues to decline, immediately find out the cause. Companies or businesses that continue to experience losses, will have a greater risk of bankruptcy. So before it’s too late, find a solution quickly and accurately. So you can reduce the risk of loss and increase your income in the next period.
Monitor Changes in Capital
The second thing you do is look at the report on changes in capital that is made, which is a financial report that provides information about changes in capital resulting from the company’s operational activities in a period. The statement of changes in capital here is closely related to the financial statements of income. If your company earns a profit then the company’s capital will increase, otherwise if the company suffers a loss then the company’s capital will also decrease.
Several components in the statement of changes in capital consist of initial capital, additional investment and the resulting profit/loss, and prive. So it can be said to assess it is quite easy. What you need to do is monitor it regularly so that you can find out the actual condition of capital and changes in working capital that occur from period to period. In addition, you can also find out the funds generated during an accounting period through the capital change report.
Know Flexibility, Liquidity and Solvency
The third thing you do is look at the balance sheet financial statements in conducting business evaluations through financial statements. This balance report consists of assets, liabilities, and capital so that it can show the company’s financial position in a certain period, as well as analyze the flexibility, liquidity, and solvency of the company.
Future Cash Prediction
The fourth thing you do is look at the cash flow financial statements. Cash flow financial statements are reports that provide information about cash receipts and disbursements in the company during a period, so that you can predict the company’s cash in the future. You do this by checking the relationship between items, such as sales posts and net cash flow from operational activities, or other methods, such as checking net cash flow from operational activities and the increase or decrease in cash. So you can then make better predictions for the amount, timing, and uncertainty of future cash flows.
Those are the 4 stages of business evaluation through financial reports that you can do for the development of your business. So immediately make financial statements correctly and accurately.
