The equity refers to the money invested by the company’s owners for its development. If the business is liquidated, equity is what will remain the business owner. According to the above equation, equity is the difference between the assets of a company and its liabilities, i.e. the cash equivalent of the total assets with which the company remains after all debts have been paid. Choose accounting services to help with that.
The importance of monthly, half-yearly or yearly financial statements
Verifying balance is the document used to verify the accuracy of the accounting records and is the main instrument on which the half-yearly or annual financial statements are prepared (the balance sheet, the profit and loss account). It is compiled monthly for all operations performed during that period. Check this out..
The balance sheet is the synthetic description of the assets and liabilities of a company at a given moment. The profit and loss account is the document that allows you to highlight how the company’s result (profit or loss recorded in the previous year) was obtained.
A profit and loss account is structured into three sections:
- the operational (operating) activity represents the revenues and expenses that the company obtained from the current activity;
- financial activity discloses interest income and expense if the company has deposits or bank loans;
- the extraordinary activity presents the revenues and expenses that the company records in a very casual way, especially: fines, damages, donations, etc.
You can draw up the cash flow of your business in just ten steps.
Cash flow or cash flow, often called cash flow, is the difference between the cash and cash outflows of a company or a project over a period of time that may be analyzed, which may be one week, one month, one quarter, a year or more. In most cases, this period is the same as a full financial year.
The cash flow is one of the most important tools used by managers, entrepreneurs, investors, or financial analysts to substantiate business decisions. You do not have to graduate from an economic faculty or work in accounting to make a cash flow. The information contained in such an analysis is of particular importance to business owners, the management of a company, and department managers. Moreover, people interested in cash flow analysis are not limited to people inside the company:
- investors take the decision to invest in a new business, based on the business’s ability to generate profits;
- creditors offer capital, but demand repayment on time, along with interest.
Draw up the revenue and expenditure budget of your business
The economic context of the recent years, marked by the economic crisis and the reduction of the investment budgets of larger or smaller companies, has led to an increase in the financial rigor of state or private companies. On the other hand, the development of financing solutions for small and medium-sized businesses through bank loans, state guarantees, non-reimbursable funds or private investment funds determined the assumption of the same rigor at a lower level of business, the financial analysis and forecasting tools being used more and more frequently.
The revenue and expenditure budget is a financial instrument that is compiled at the level of a company’s entire business, at the level of a project the company wants to implement, or at the level of the company’s main activities.
The goal of generating a revenue and expenditure budget is to estimate, as accurately as possible, the evolution of revenue and expenditure over a certain time horizon, which is usually one year. Drawing up a revenue and expenditure budget involves going through five steps, which are detailed in this article.
The ROI is the minimum level of sales to be made so that the company does not suffer losses. It is dependent on the level and structure of fixed and variable costs of the firm. In other words, the profitability threshold is the level of production where the sales revenue is equal to the total costs borne by the company and the profit is zero. From this level, any extra unit sold will bring profit. Determining the profitability threshold should be a preoccupation of any entrepreneur eager to start a business. Knowing the level at which receipts are equal to costs is essential to increase the profitability of any trading company.