You only need 3 metrics to master your financials.
Here they are:
Here they are:
As an Accountant for my whole career, I actually agree with you: Accounting is way too complicated.
The reality is, most people only want the answer to a few questions:
• Am I making money?
• Do I have enough cash?
• Is my business growing?
The reality is, most people only want the answer to a few questions:
• Am I making money?
• Do I have enough cash?
• Is my business growing?
These questions can be answered by 3 easily attainable elements:
1. Profit
2. Cash flow
3. Enterprise value
1. Profit
2. Cash flow
3. Enterprise value
1. Profit
Profit comes from the Income Statement.
Revenue comes in, expenses go out.
With Accrual Financials, the matching principle tells us that Revenue & Expenses “match” which assures us that we’re actually making money.
Profit comes from the Income Statement.
Revenue comes in, expenses go out.
With Accrual Financials, the matching principle tells us that Revenue & Expenses “match” which assures us that we’re actually making money.
When looking at profit, ask:
• Is it trending up or down?
• What is the major factor in it’s movement?
• Who in the company can be responsible for the change?
• Is it trending up or down?
• What is the major factor in it’s movement?
• Who in the company can be responsible for the change?
2. Cash Flow
Profit is not the same as cash flow! It’s the cash movement during the period.
This is most easily found in the Statement of Cash Flows.
Cash flow is what actually “feeds” a business. It can be:
• reinvested
• fund growth
• paid out in dividends
Profit is not the same as cash flow! It’s the cash movement during the period.
This is most easily found in the Statement of Cash Flows.
Cash flow is what actually “feeds” a business. It can be:
• reinvested
• fund growth
• paid out in dividends
When looking at Cash Flow, there are many metrics you can use:
• Tracking your cash balance
• Operating Cash Flow
• Free Cash Flow
• Tracking your cash balance
• Operating Cash Flow
• Free Cash Flow
Cash balance = bank statement & trial balance
Operating Cash Flow = Net Income + Non-Cash Charges +/- Change in Working Capital
Free Cash Flow = Operating Cash Flow - Capital Expenditure
Learn more here: doc.clickup.com
Operating Cash Flow = Net Income + Non-Cash Charges +/- Change in Working Capital
Free Cash Flow = Operating Cash Flow - Capital Expenditure
Learn more here: doc.clickup.com
3. Enterprise Value
Is your business creating value, thus making you more money?
Enterprise value is created from:
• Profits
• Cash Flow
• Market conditions
• Unique capabilities
• Gap between assets & liabilities
• and many more
Is your business creating value, thus making you more money?
Enterprise value is created from:
• Profits
• Cash Flow
• Market conditions
• Unique capabilities
• Gap between assets & liabilities
• and many more
Enterprise value can be measured in many ways depending on the company and industry conditions:
• Return on Assets
• Return on Equity
• Company Valuation
• Return on Invested Capital
• Return on Capital Employed
• and many more
• Return on Assets
• Return on Equity
• Company Valuation
• Return on Invested Capital
• Return on Capital Employed
• and many more
Today, I’ve opened enrollment in my cohort!
We’ll be digging deeper into financial statements (and this concept) so that you can run your company with confidence.
If you RT the first tweet today only, I'll send you a code for $250 off.
Don’t delay: kurtishanni.com
We’ll be digging deeper into financial statements (and this concept) so that you can run your company with confidence.
If you RT the first tweet today only, I'll send you a code for $250 off.
Don’t delay: kurtishanni.com
Over the coming weeks, I’ll break these concepts down more granularly here on Twitter.
Follow me so you don’t miss out: @KurtisHanni
If you learned something, I’d appreciate a RT of the first tweet as well:
Follow me so you don’t miss out: @KurtisHanni
If you learned something, I’d appreciate a RT of the first tweet as well:
I will also write about these concepts each of the next 3 Thursdays in my newsletter.
Subscribe today so you don't miss it:
kurtishanni.com
Subscribe today so you don't miss it:
kurtishanni.com
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