The most important thing to look at to know the economic health of your company and what has happened with the money that has circulated through it. Look, for this to be useful to you, imagine that you are the owner of the company:
First, look at the Income Statement (P&L):
This report shows you how much you have earned in a specific period and what has been happening with the revenues as they are reduced by costs.
The essential points here to understand and focus on are:
- Sales
- EBITDA
- EBIT
- Net Profit
Next, look at the Balance Sheet:
This provides you with a snapshot on a specific date of what the company owns and owes.
It helps you understand if you have a good business.
You should be especially interested in knowing:
- The amount and situation of debts
- The Returns on capital, which you can calculate with a pen by combining information from the balance sheet with that of the income statement
Finally, also examine the Cash Flow Statement:
This statement tells you what the company does with the money it earns each year.
You should be interested in knowing:
- Investments made
- Debt movements
- Dividends distributed
- Purchases or issues of shares
These reports are your windows into the financial health of your company.
By understanding them, you can make smarter and more strategic decisions to improve your results.
These are things that some of the best managers I know observe and understand very well.
You might also be interested in reviewing them in case you are not paying them adequate attention, as you could be losing money by neglecting them.
Have a great day.