Successful Businesses Derive Their Strength From Skillful Management Strategies And A Positive Financial Position

895 WordsSep 7, 20154 Pages
Introduction Successful businesses derive their strength from skillful management strategies and a positive financial position. The only way to gauge and improve the financial position of any business is to have a solid method of tracking its dollars and cents, as a function of how it performs against its own track record over time and within the market in which it operates. Profitable businesses utilize the income statement, balance sheet, owners’ equity calculations, and the statement of cash flows for this purpose. Income Statement The income statement reflects business operations over time. It reports the revenues generated and expenses incurred by a firm over an accounting period (Melicher & Norton, 2014). Major expenses that are shown on the statement are the cost of goods sold; the selling, general, and administrative expenses; and depreciation. Income expense is also included, which is basically a representation of federal and state taxes that the business incurs based on the type of business organization. This statement is crucial because it demonstrates how well a business is doing in its market compared to other similar businesses and can be used as a method for determining how the business can improve itself. Naomi Smith of the Houston Chronicle notes: “Use your income statement to track important metrics and determine which areas need particular attention.” (Smith, n.d.) Balance Sheet The balance sheet is a view of the financial condition of a company

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