Do you frequently check your balance sheets? A balance sheet is a critical element to building your business. A few key points to remember when interpreting a balance sheet for your business are:
- Cash in Bank: Know how much money you have available at all times.
- Working Capital: Working capital = current assets-current liabilities. This ratio can help you determine if your company has enough liquid capital to cover your short-term liabilities.
- Cash Reserves: These reserves are money you should keep on hand for your short-term needs and emergencies.
- Net Worth: Your company’s net worth can be determined by subtracting your liabilities from your assets. Net worth is a key measure of the “book value” of your firm.