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As an owner, executive or director, you are likely using financial information to track performance, to manage or monitor spending, to evaluate a request for more resources, to set incentive compensation, or to make an investment or financing decision.
 
The key questions for you to ask are:
1.Do you have access to the right financial information?
2.Is that information credible?
3.And is that information timely enough to help you make decisions to manage and guide the business?
 
Owners and directors fundamentally get to make or influence 10 types of decisions that concern how an organization sources cash and deploys it. Think of these as levers that owners and directors can pull at anytime. The challenge is knowing which of the ten levers to pull at any given point in time.
 
There are essentially five levers you can pull for sourcing cash.
 
Cash sources:
 


Internally generated operations.


Working capital management.


Divestitures.


Issuance of debt.


Issuance of equity.


Deployment sources:


Reinvest in existing operations.


Acquisitions.


Pay down debt.


Dividends.


Buyback shares.


The output from the financial close process is the financial statements. Financial statements summarizes and reinforces the most important stories of the business, only translated into financial terms. Everything you hear from management about how the sales have gone, how operations has performed, how growth projects are progressing –will all be captured in the financial statements. Finance is the most integrated function in any organization and touches all departments. There are three primary statements that you will be presented with.
 
The income statement:
 
The income statement is often the most interesting statement for executives, owners, and directors. It’s also the statement that is both understood on the surface and misunderstood in the details. The income statement tabulates your revenues during a period. Revenues might also be called Sales. In Europe, most countries refer to revenue as “turnover.” Revenues are only recognized on the income statement when a product or service is delivered regardless of when cash changes hands.
 
REVENUE - EXPENSES = INCOME
 
The Balance Sheet
 
The balance sheet "balances" the book value of assets against how these assets have been financed using liabilities and shareholders’ equity. An asset represents something that a business owns –customer IOUs, inventory, properties, equipment, and cash in the bank account are all assets. Those are the obvious types of “tangible assets.” However, there are also “intangible assets" such as patents, customer lists, trademarks, goodwill, prepaids and deferred taxes that may also show up as an asset.
 
Liabilities represent monies owed to others. This would include amounts owed to suppliers, amounts owed to the government, amounts owed to banks and amounts owed to other lenders.
 
Equity is a balancing account that summarizes three things. Capital contributed by owners, capital withdrawn by owners, and cumulative amount of income earned by the business over its entire corporate history.
 
ASSETS = LIABILITIES + EQUITY
 
The Cash Flow Statement:
 
The cash flow statement gives you a clearer picture of the flow of funds in and out of the company’s bank account. It’s broken into three sections.
 
Cash to/from operating activities summarizes how much cash the business has generated (or spent) during the period. You obviously want to see this as a positive number. Income reported on the income statement is not synonymous with cash generated with the business.
 
Cash to/from investing activities summarizes how the business has invested or divested in long-term assets –assets like investments, properties, and equipment.
 
Cash to/from financing activities summarizes how you funded the business through either debt issuances or equity contributions. Alternatively, if you are paying back loans or paying a dividend to your shareholders, those would show as negative cash outflows in this section.