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Business financials are the cash-flow statement, income statement and balance sheet of a business. These reports allow the business owner to know the financial standing of the company at any point in time. Business financials are also necessary for putting together a business plan or for applying for a business loan with a bank or lender.
During the planning stage of a business, the cash-flow statement that makes up the business financials contains the estimate of how much cash the business expects to bring into the business and how much the business expects to pay out in expenses. As the business starts to operate, the cash-flow statements details the amount of cash the company is bringing in the door from sales and how much the company is paying out in expenses.
One of the statements that makes up the business financials of a company is the income statement. The income statement when the business is putting together a business plan is a projection of the profit or loss the business owner expects over set periods of time. Since the income statement is a projection, it should include short-term and long-term projections. As the company begins to operate, then the income statement includes the real numbers, which include revenue, expenses, cost of goods or services sold, gross profit, operating profit and the net profit of the business before and after taxes.
The balance sheet is a unique aspect of the business financials. It is a snapshot of the situation of the business for a very specific point in time. Specifically, the balance sheet reveals the exact assets, liabilities and equities of the company as it stands on the day that a person reviews the balance sheet. Generally, the balance sheet is reviewed as part of the business financials on the last day of the year, fiscal or calendar, depending on the accounting system of the company.
If a business is putting together its business financials to obtain a loan, the lender wants all of these statements to look healthy. Healthy business financials show that the business will have the potential to pay back the loan. Since the numbers are projections, the figures are not exact, but should be more on the conservative side. These figures should be conservative so that if the actual figures are much lower, it does not pose a problem with the lender once the loan is in repayment. If you are providing actual figures, never embellish or lie. Always use the correct figures when using business financials to obtain a loan.