There are three basic financial statements:
Balance Sheet
Income Statement
Cash Flow Statement
Many leaders of privately owned businesses primarily focus on the Income Statement, which is essential, as it reflects the company's operations.
Even with a strong Income Statement comprehension, overlooking information in the Balance Sheet and Cash Flow Statement creates a critical knowledge gap.
Without a solid grasp of these two basic financial statements, leaders may struggle to understand key business concepts such as cash flow, liquidity, and overall financial health. This lack of insight often creates "blind spots," resulting in incomplete evaluations of historical results and, consequently, leading to under-informed future decision-making.
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Logical / Intuitive?
Companies understand their income statements because they are logical and intuitive.
However, they struggle with cash flow because traditional cash flow statements combine unrelated elements, reducing their effectiveness and creating confusion.
Understanding business strength and liquidity is also challenging because balance sheets are complex. They accurately reflect various factors influencing financial health — both positive and negative — without providing a clear, unified view.
To address this, key balance sheet elements must be combined to present a meaningful picture of a business’s financial health and its liquidity.
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The following table subjectively breaks down the three basic financial statements into the two categories of being Logical / Intuitive along with an overall clarity grade.
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Problems must first be recognized and defined before they can be resolved.
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Business leaders need and deserve clear and functional, high-level financial reporting that shows whether their capital and time have been well spent, and which provides insights for making more informed and confident business decisions.
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It is a responsibility and an honor to provide business leaders with their company's succinct and understandable financial fundamentals.
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Trender® Platform
With the 5 Elements® of Financial Fundamentals, the Trenders effectively provides business leaders with their company’s full financial profile in a succinct and understandable manner.
Learn more:
Edward B. Patton
5701 Broadway, Suite 102
San Antonio, Texas 78209
Phone (210) 822-9977
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