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The Balance Sheet…the 2nd of 3 Financial Statements

The Balance Sheet…the 2nd of 3 Financial Statements

Do you know what a Balance Sheet is?

Most CEOs that I work with don’t...

After all...

isn't cash flow what's most important?

Or profitability?

Actually, if you were to ask me... it's the most important of the 3 statements


Because a Balance Sheet is the one statement that gives you visibility into ALL 3 statements

OK...first, let's define what a Balance Sheet is

A Balance Sheet tells you:

➡ How much the company OWNS or substantially CONTROL..IE anything of economic value (Assets)

➡ What the company OWES (Liabilities)

➡ And how the company has been FUNDED (equity)

To put extra correctly, Liabilities and Equity BOTH show you how a company has been funded, but liabilities are CAPPED, while equity is UNCAPPED

So how does a Balance Sheet tell you about profitability?

Or Cash flows?

You can learn the profitability of a business by understanding the NET CHANGE in RETAINED EARNINGS / NET INCOME on your Balance Sheet

If those 2 numbers are growing...the company has been posting a positive net income! 🤑🤑🤑

..and you can learn about where CASH is going by taking the difference in all other Balance Sheet accounts (roughly)

So as you can see - the Balance Sheet gives you the most information!

Learn how the Financials connect here


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