Explanation should include the following:

show how much money a business earns or loses over a specified period
identify which line items are expenses and which are revenue
show the profitability of the business
alert the business owner to the financial value of the business at any given time
show trends useful in forecasting.

show the amount of money coming into a business and the amount of money going out
help the owner determine whether the business's revenue exceeds its expenses or if its expenses exceed its revenue.

Balance sheets
- statements of the assets, liabilities, and capital of a business at a particular point in time
- detail the balance of income and expenditure over the preceding period.

Startup costs
- finances needed before initiating a venture
- equipment and supplies, office space, inventory, legal and accounting fees, communications, advertising and marketing, market research, utilities, licenses and permits, payroll, professional consultants, insurance, taxes.

Process/Skill Questions:

How might a new business gather information to project income and expenses?
How does an income, or P&L, statement depict business profitability?
How is gross profit calculated on an income statement?
What is the difference between variable and fixed expenses on an income statement?
What could be the result if a business does not generate an income, or P&L, statement?
How are income, or P&L, statements used for product/service planning?
What are the legal and business consequences of false information reported in financial statements?
How do department managers use an income statement when monitoring a budget?
What is the primary purpose of a cash-flow statement?
Why is it important for business owners to track cash flow?
What could be the result if a business did not generate a cash-flow statement?
How are cash-flow statements used for planning? What are other uses for data in cash-flow statements?
What is the difference between cash receipts and cash disbursements?
Why must an entrepreneur know the net worth of the business?
What does net worth tell a business owner?
Why should an entrepreneur track business assets?
How often should an entrepreneur review and update the company’s balance sheet? Why?
Why must a balance sheet balance?
What are viable options for obtaining funding to cover startup costs?
Which financial statements can be used to forecast sales?
What is the difference between accounting and finance?

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