Author: Juana Baumgartner

Financial statements play a crucial role in providing insights into the financial health and performance of a small business. By analyzing these statements, business owners can make informed decisions, track progress, and identify areas for improvement. Here are examples of the key financial statements that small business owners should be familiar with:

1. Income Statement (Profit and Loss Statement)

The income statement provides a summary of the business’s revenues, expenses, and profits over a specific period of time, typically monthly, quarterly, or annually. It showcases the profitability of the company by displaying the net income or loss. Example components include:

• Revenue: Sales, services rendered
• Cost of Goods Sold (COGS): Direct costs related to producing goods or services
• Operating Expenses: Rent, utilities, salaries, marketing costs
• Net Income: Total revenue minus total expenses

2. Balance Sheet

The balance sheet provides a snapshot of the business’s financial position at a specific point in …