The Net Income Statement does not tell you what cash you have available to run your business. Contrary to what you may assume, the net revenue listed on your Net Income Statement is rarely the same as the cash balance in your bank account.

Another way to think about the relationship between assets and liabilities is this: Assets are what the business owns, liabilities are how the business paid for those assets. Assets – Liabilities = Owner’s Equity This

It’s not what clients pay for the product or service, it’s what the business delivers that matters. Product prices and the way they’re communicated should remind customers of how much those products or services contribute to their success. Price up, deliver professionally, and you’ll be amazed at how a quality-conscious audience will be attracted t

But net income will appear higher than it would be if the expense of the equipment were recognized all at once. The Net Income Statement will show only the depreciation expense for the computer in the year it was purchased. Just know, this is another reason why the annual cash flowing out of the business as captured on the Cash Flow Statement

Raising prices on key items, creating minimum order sizes, and reducing COGS through re-engineering the product or changing suppliers are all possible ways to improve gross margin. Diversifying the client base reduces revenue risks if a large client leaves for any reason. This is true for all types of businesses.

One of the most important things I do is to counsel people on the lingo their financial people and accountants use so at least they know the basics. Accountants, though, are historians. Their function is important because the past informs the future. But by the time you get the numbers from the accountant, it’s too late. While you can learn a lot f

The portion of the total profits of the company that the owners have reinvested in the business during its entire history is called retained earnings. The retained earnings on the company’s balance sheet is the cumulative net income that the company has achieved throughout its entire history minus the cash dividends that the company has paid to its

net margin Net revenue minus both direct variable expenses (COGS) and indirect variable expenses (operating costs) per unit.

The thick, black, upward-sloping line on Figure 4–4 represents net revenue. This line traces how many dollars will be brought into the company by the sale of one, two, three . . . 200, 250 units (unit price times the number of units sold, remember?). Notice that the net revenue line starts at the point (0,0),