Face it, everyone regardless of profession deals with numbers. Some may think that they have successfully escaped from them as the graduated from college, only to realize that the world is wrapped in ratios, equations, and simple formulas. This can either be a living nightmare, or you can defeat the fear once and for all. It’s never too late (or too early) to learn the language of financial statements.
The term “financial statement” doesn’t make sense at first. Numbers are for counting while statements need words, so how could these two mix together? But when seen as “money statements,” then suddenly it’s a crucially important matter.
Not only is it important for you, but for the management and stockholders as well. It’s important for the management because financial statements speak of the company’s success and competence, whereas stockholders refer to financial statements to know whether or not to invest in a company. In other words, financial statements tell whether the company made or lost money.
Financial statements hold the secrets of a company. Aside from stating whether the company earns or loses money, they also provide clues on where the management might find more resources to boost its revenue. In addition, financial statements reveal a company’s past performance and potential.
It’s equally important for business owners to understand financial statements to know if their business is earning. It wouldn’t be too wise to rely solely on the accountant to paint the business’ financial situation.
But whether or not you’re a manager, stockholder, or entrepreneur, learning the language of finance would be truly beneficial. First, all will have to agree that it’s helpful to understand your company’s financial health and behavior.
Two, this is knowledge that you can use to make convincing proposals and requests. Arm your arguments with hard facts and it will be easier to prove how your proposal can have a bearing on the company’s financial status.
Three, understanding financial statements is preparing for something that is sure to come around. By the time you encounter income statements, you’ll be able to analyze, interpret, and challenge numbers that you would otherwise be quiet about in a meeting.
Four, understanding numbers gives you an edge. Through which you can compare past, present, and projected financial statements then track changes. You’ll be able to give an explanation behind those changes instead of watching others do all the thinking.
Through which you can also compare your company’s operations against similar organizations, or your department with other internal areas. You can simplify your life instead of choosing to ignore how balance sheets work.
Lastly, it levels the playing field for those who already have a background in accounting. Have you ever sat in a meeting where people suddenly started talking in numbers? When colleagues and bosses start mentioning ROI’s and referring to cash flow statements, you wouldn’t have time to search for definitions. So why not learn about them today?