Three Basic Financial Concepts
- Ed Patton
- Aug 21
- 2 min read
Updated: Sep 26
This is written for the benefit of many SMB leaders and their advisers.
Business leaders should ask their accounting / financial advisers if they understand the following three simple and basic financial concepts and when was the last time they used them in a real-world business situation:
❶ List of financial fundamentals.
❷ When was the last time you explained, to a business leader, their company’s cash flow in a way they could understand it?
❸ What causes the amount of a company’s working capital to increase or decrease?
These concepts need to be understood to comprehend and articulate a business’s financial fundamentals in a clear and concise manner.
The above three items are not a list of a company’s financial fundamentals, but if they are not understood, the ability to convey a business’s full financial profile is greatly diminished.
There is a big difference between providing compliance-required information and articulating jargon-free, clear, and concise, reality-based financial fundamentals for business leaders.
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Rhetorical Question
Rhetorical question for management of SMBs…"Do you feel there is a void when it comes to being provided complete and comprehensible financial fundamentals?"
It is my experience that the answer to this rhetorical question is almost always – “Yes”.
Warning – businesses increase their odds of experiencing an undesirable outcome(s) when they do not comprehend and track their complete financial situation.
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Trender® and the 5 Elements® of Financial Fundamentals
For the first time, a business’s complete financial fundamentals are defined, calculated, summarized, graded and discussed for the benefit of the decision makers.
This functional and effective information is efficiently produced from the existing business reports of their internal balance sheets and P&Ls.
When applicable, recent line of credit borrowing base reports are used in liquidity calculations.
Companies do not need to create new or additional reports.
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Why It Matters
Financial fundamentals are essential at every stage of every business...this is because they are "fundamental".
Leaders deserve reporting that shows whether their capital and time are well spent – and provides insights for more confident evaluations and effective decisions.
If it is not clear and concise, it is of limited value to business leaders.
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Reach out for an introductory phone or video call to discuss how succinct and understandable financial fundamentals have helped the leaders of many privately owned businesses.
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Edward B. Patton
5701 Broadway, Suite 102
San Antonio, Texas 78209
Phone (210) 822-9977
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