• Ed Patton

Financial Fundamentals

Updated: Mar 18, 2021

For many years, I’ve been working with small to mid-sized business owners and decision-makers. Throughout my career, I have heard things like, “I just can’t make sense of the financial statements that are provided to me” and “My financial advisor(s) are knowledgeable, but they just don’t provide me with the clarity I need.

Let me assure you, as I have assured many of my clients, there is nothing wrong with you. Not understanding your business’ complete financial fundamentals is not about intelligence, ignorance or laziness. Even graduates of the top business schools in the country and financial analysts with international firms struggle with this stuff.

The Problem

Whether you’re making key decisions or just trying to understand on-going results, you’re likely wasting a lot of time staring at the standard financial reports churned out by the many experts you’ve hired or the financial software you’ve paid a lot of money for and yet still can’t get the guidance or clarity you need.

Why is this a Problem?  

Because standard financial statements, instead of providing the financial fundamental essentials for business decision-makers, are designed to meet the needs of large, entrenched organizations such as the IRS, the SEC and the FASB. Add to this, the rules and requirements of these organizations are constantly changing, making comprehension and clarity impossible even if you immerse yourself in their literature.

There is a Solution

So, what’s a business decision-maker to do?

What I have discovered is that financial clarity begins with succinct, comprehensible financial fundamentals.

That’s why I designed a system called the 5 Elements® of financial fundamentals generated by the Trender® Platform. The Trender Platform provides business decision-makers with clear and concise information about their business as well as trends that give a comprehensive picture of where the business has been and what to expect in the future.

Every month, all five elements (Operating earnings, cash flow, liquidity / financial strength, shareholder value and borrowing capacity) are summarized; given old-school A - F report card grades; and backed with supporting information. This is all created from your own internally prepared monthly balance sheets and income statements. The business does not need to prepare anything different or learn yet another software program.

For business decision-makers, this is like a breath of fresh air. The 5 Elements provide the information they need to make critical decisions and a comprehensive view of their business, something they’ve wanted all along. And, their bankers, investors and board members use the 5 Elements too because it provides them with the financial insight they also need.

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