Do you know which financial statements are important for investors?
If so, look no further– we’ve rounded up everything you need to know (including what investors want to see in those statements!)
The Types of Financial Statements Important for Investors
There are three types of financial statements that are important for investors:
1. The Balance Sheet
A balance sheet outlines the liabilities, assets, and general capital of a business at a specific point of time.
These financial statements are used to detail both the balance and the expenditure of a business.
2. The Income Statement
An income statement– also known as a “profit and loss statement– is a financial statement that orbits around a company’s revenues and expenses during a particular period of time.
3. The Cash Flow Statement
A cash flow statement provides data on all cash inflows and outflows, including business activities.
The three types of cash flow that this statement outlines are cash flow from operating activities, cash flow from financing activities, and cash flow from investing activities.
What Investors Want to See In Financial Statements
Normally, there are four crucial aspects that investors want to see reflected in your business’s financial statements:
1. Remaining Revenue
A company’s financial statements reveal their remaining revenue, or their net profit.
Frequently, a large number of business owners do not have a solid comprehension of the remaining revenue for their company. The question of whether or not a business is making money is the first question out of an investor’s mouth, and that’s only the beginning.
2. Transactions
The transaction between customer and provider is an important one. If you have a product or service that you’ve worked tirelessly to bring to life and make amazing, you want to be sure that people will be interested in buying it.
Err on the side of caution and make sure you are not bolstering a sales track record before looking for potential investors.
3. Margins
If you aren’t making money, sales don’t mean anything– and that’s the cold hard truth. In addition to remaining revenue and transactions, investors require your overall profit margins as well as at a specific level for the product.
Investors will also evaluate your margins and whether or not they are against your chosen industry’s benchmarks, as well as other investment opportunities that are accessible.
4. Debt
This is a word we are all aware of and we all know what it means. It scares all of us, and can be the cause of a lot of sleepless nights. For investors, the word “debt” and what it means is even more scary.
If a company goes out of business, debt holders receive their money first before investors can lay claim to the remaining money, if there is any.
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For all your financial questions and ensuring the success of your business, reach out to Virtual CFO today to find out how we can help.