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  • Christie Varner

PJS #023: 💥 5 Minutes to Golden Insights from your Financial Statements

“What should I be looking for in the financial reports? I get them every month, but am not sure what they're telling me.”

It’s a common question - because financial literacy isn’t something we are born with. It is learned.

As founders & CEOs, we pour ourselves fully into our business, right? I know. Me too.

But we often don’t stop to take the time to review our financial statements. And, even if you do, you might not really know what to look for.

So instead, you:

💰Check the company’s bank balance as a barometer for how the business is doing.

📈 Or you figure if sales are growing, you must be on the right track.

You're a rockstar at bringing in revenue…and yet you still seem to be cash poor & not feeling ahead.

Not knowing how to read the financial statements means you just ignore them. Or you look at them - and waste time and energy on the wrong thing.

Rather than feel bad about it, it’s time to take charge and spend a few minutes learning the key components of the financial reports - and what to look for.

Let's dive in...

Income Statement

The income statement is your “report card” for a period of time.

Key components:

  • Revenue: sales of your product or service

  • Cost of Services: costs DIRECTLY attributable to the revenue brought in

  • Gross Profit: Revenue - Cost of Services

  • Other Expenses: selling & general operational spending

  • Operating Profit: Gross Profit - Other Expenses

  • EBITDA: Earnings Before Interest, Tax, Depreciation, and Amortization

  • Net Income: EBITDA less interest, tax, depreciation, amortization

What to look at:


✅ Results for this period vs the one right before (March vs February)

✅ Results for this period vs the same period the year before (March 2023 vs March 2022)

✅ Results year to date for this year vs last (Jan - Mar 2023 vs 2022)

✅ Results vs forecasted


✅ % of gross profit to sales

✅ %operating profit to sales

✅ % net income to sales

Balance Sheet

Freeze! Hold that look. Yep, that’s what a balance sheet is. A picture of a moment in time of your business - as of ONE DATE.

Key components:

  • Assets: what your business owns (cash, receivables, inventory, etc)

  • Liabilities: what your business owes (payables, debt)

  • Equity: assets - liabilities – the cumulative impact of net income (or loss), owner contributions & distributions over the life of the business

What to look at:


✅ Balances for this date vs the one right before (March 31 vs February 28)

✅ Balances for this date vs the year before (March 31, 2023 vs March 31, 2022)

✅ Balances vs forecasted


✅ Current ratio: Current Assets/ Current Liabilities (> 1 is what you want!)

✅ Net working capital: current assets - current liabilities (you want it positive!

✅ Trends

✅ Debt to Asset Ratio: Total Debt/Total Assets

Cash Flow Statement

This statement shows the movement of into & out of the business for the period you're looking at.

  • Not all profit/income on the income statement is cash in your bank today.

  • This statement shows where cash was taken in & used in the business (operating, finance & investing activities).

  • Remember that profit is important - but without cash, you have no business. It’s critical to have a cash flow forecast and an understanding of your business’s cash situation.

Financial Statements Expire?

Why yes they do? Just like milk does.

Financial statements show you what happened in the past in your business (like looking at a rear view mirror).

You can use them to predict the future & make adjustments to your business. If you review your financial statements monthly, you can use them to make strategic decisions going forward that'll bring you closer to achieving your goals.

But if you're reviewing financial statements that aren't current - well the information in them that would be useful for projecting future months will about as valuable as stale potato chips.

What To Do Next

Now you can see that becoming financially literate is key to making great use of the golden insights found in the financial statements.

DIY - so many options

✅ YouTube

✅ Books

✅ Podcasts

✅ Online courses (shameless plug for mine - Small Business Financial Foundations)

Shortcut to Success - hiring an expert to guide you

✅ Fractional CFO - paying for a CFO’s expertise at a fraction of the cost for the part-time hours you need (this is what I do & love!)

✅ Controller or CFO - once you need full-time hel

- - - - -


Warren Buffett said it: " Financial statements are the key to unlocking the secrets of a business."

1. You deserve to unlock the keys to achieving your success more easily by learning to read financial reports.

2. No one is born financially literate. We all can learn!

3. Financial statements reveal the health of your business.

4. Income Statement - the report card of how much you sold and what you spent

5. Balance Sheet - what your business owns & owes

6. Cash Flow - how cash came into & out of the business

7. Learn it DIY or by hiring an expert - shortcut to success

- - - - -

Final Thoughts

Diving into a new area that you’re unfamiliar with can feel daunting. I know because I’ve done it many times myself as an entrepreneur.

But I’ve also learned that working hard on something I don’t understand or am not good at (tech!) just frustrates me & makes me avoid it. Which isn’t good for my business or how I feel about myself.

Ignoring the golden gems available to you from understanding your financials is actually HURTING your business.

Making moves to tap into those golden insights is going to lead you to more profit & better cash flow…which of course means more confidence and less stress.

And who wouldn’t sign up for that??!!

I hope you found this valuable. REPLY & let me know. I'd love to hear your thoughts!

See ya next week, my friend!

Whenever you're ready, here are 3 ways I can help you:

1. Ready to increase profit & have your stress melt away? Schedule a call to see if we'd be a good fit to work together. I have availability for a few additional clients.

2. Want to create your own Custom Roadmap to Success with my help? Let's talk about doing that. Schedule here.

3. Want more like this? I post on LinkedIn every weekday at 7:15a CST. I'd love to connect. Find me here!

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