Hiring a public finance consulting company or firm in America is a great way to relieve yourself from the overwhelming work of analyzing financial statements. While a lot of business owners might hire an agency to analyze their financial statements, learning to analyze them will help you determine the financial health of your company. You should analyze your financial statements once a year if not quarterly. This will enable you to take full advantage of the critical information they offer.
Company liability review
Financial statements show the existing liabilities which include lines of credit, business loans, credit extended from vendors and credit cards. A business owner who is planning to apply for a loan for expansion can look at the financial statements to know if he needs to reduce the current liabilities before application. Lenders will look at your financial statements and consider the revenues, existing liabilities and assets.
Cash flow review
As the name implies, a cash flow review accounts for money in and money out. Cash flow review shows the financial solvency of a business to pay its liabilities at any point. Some businesses have cyclical revenues with consistent expenses.
Review assets and inventory
Assets are included on your balance sheet. It is crucial to analyze whether there is too little or too much inventory. This will help business owners to prepare for upcoming sales months. When you keep too much inventory on hand, you create a potential problem that ties up money. When you don’t have enough inventory, you can lose market share and customers.
Identify trends and know the steps needed
Hiring the best finance data analysis company in America will ensure that your financial statements are analyzed from quarter to quarter to help you see the trends in growth. Starting businesses might have losses in the initial years while they develop products and a stable customer base. Statements also show whether you are meeting your projected estimates. If a company is projecting a 10% annual growth but only achieve 7%, business leaders should look for ways to increase revenue or cut costs.
Seeking investment capital
The financial statements are important when a business seeks investors or partners. Analyzing financial statements helps investors determine if a business is making profits. It also helps to identify a reasonable cost per share. Investors put their money into a company for growth. This is why shareholder equity is defined based on the investment added to assets. The liabilities are subtracted to define shareholder equity.
Determine profit margins
A gross margin percentage can be used to determine the cost of producing your product. This is the total revenue minus cost of sales divided by the total revenue. This information can be used to reduce the cost of production and increase your bottom line.
Keep current on debt
A public finance consulting company can help you determine whether your company has adequate liquidity to meet any upcoming debts. The current ratio analysis is equal to the total current assets divided by current liabilities as portrayed on your balance sheet.