What Do Financial Statements Tell Us?

Special edition coming at you this morning! Another request was an accounting student questioning the financial statements. Also, new sponsor this week and they have some solid/funny stories about business/HR leadership that I’m sure many of you can relate to. Check them out!

Accounting is like another language at times or for those that specialize in another area of business. I’m here to help with that! Do I know it all? NOPE! Have I had great leaders guide me for 15+ years to be well-rounded? YESSS!

Time to check out the meat and potatoes 👇️ 

Financial statements can feel intimidating to many, but you don’t need to be an accountant to understand them or use them to make better decisions. Does it take some time to get a feel for things? Yes, but it’s so doable!

These reports are tools to help you see where your money is coming from, where it’s going, and how financially healthy your business or household is. The three most important statements are the Profit and Loss (P&L or Income Statement), Balance Sheet, and Cash Flow where each tell a different part of the story and together they give you the complete picture.

The Profit and Loss Statement (P&L) also called the income statement, shows your revenue, expenses, and resulting profit (or loss) over a set period, such as a month, quarter, or year. It answers the question, “How much did we make?” I see this ran monthly at most businesses.

• Why it’s important:

  • Reveals if your business or household is profitable or losing money.

  • Highlights trends in revenue and expenses over time.

  • Helps identify areas where costs are creeping up or where revenue can grow.

• How to use it:

  • Compare current results to past periods to see growth or decline. Look at this monthly to get better results/feedback.

  • Watch expense categories for unusual spikes that may require action.

  • Focus on net profit rather than just top-line sales to measure real performance.

The Balance Sheet is a snapshot of what you own, what you owe, and your net worth at a single moment in time. It lists assets (cash, property, equipment, receivables), liabilities (loans, credit card balances, unpaid bills), and equity (the residual value after debts are paid). It answers the question, “What’s our financial position right now?” That isn’t an all-inclusive list above, but very common items.

• Why it’s important:

  • Shows your overall financial strength and stability.

  • Reveals your debt levels compared to the value of your assets. Work in Credit? You likely check this out a lot.

  • Helps lenders or investors evaluate your ability to take on more obligations.

• How to use it:

  • Track whether assets are growing faster than liabilities.

  • Monitor your debt-to-equity ratio to avoid becoming over-leveraged. ← This may be the next topic we cover…

  • Use it to determine if you can safely handle major purchases or expansion plans.

The Cash Flow Statement tracks the actual cash moving in and out of your accounts over a specific time frame. It breaks activity into operating (day-to-day income and expenses), investing (buying or selling assets), and financing (loans, equity injections, repayments). It answers the question, “Where is our cash going?”

• Why it’s important:

  • Shows whether you can cover bills, payroll, and other obligations in real time.

  • Highlights the impact of operational decisions on available cash.

  • Helps predict shortages before they happen so you can plan accordingly.

• How to use it:

  • Monitor operating cash flow to ensure your core activities are generating enough money to sustain operations.

  • Plan ahead for slow months, seasonal dips, or large upcoming expenses.

  • Decide when to invest, pay down debt, or hold cash reserves based on actual liquidity.

When you regularly review these three statements together, you move from reacting to your finances to actively managing them. Your P&L tells you if you’re profitable, your balance sheet shows your overall financial position, and your cash flow statement tells you if you can keep running smoothly day-to-day.

Understanding them doesn’t just make you more informed, it makes you a more confident decision-maker.

Sponsoring the Cash Flow Chronicles today is I HATE IT HERE

Thank you for supporting our newsletter. Each time a reader engages with our sponsor’s ad, this directly supports CFC’s mission to be the TOP FINANCIAL newsletter Beehiiv has to offer.

Even if you do not buy a product, subscribe, etc. this greatly supports our mission. Take 5 seconds today and check them out!

HR is lonely. It doesn’t have to be.

The best HR advice comes from people who’ve been in the trenches.

That’s what this newsletter delivers.

I Hate it Here is your insider’s guide to surviving and thriving in HR, from someone who’s been there. It’s not about theory or buzzwords — it’s about practical, real-world advice for navigating everything from tricky managers to messy policies.

Every newsletter is written by Hebba Youssef — a Chief People Officer who’s seen it all and is here to share what actually works (and what doesn’t). We’re talking real talk, real strategies, and real support — all with a side of humor to keep you sane.

Because HR shouldn’t feel like a thankless job. And you shouldn’t feel alone in it.

Sign Up Free

Contact me if you’d like to network or partner together. I’d love to chat with you more about the services I offer on the side through Guernsey Consulting. If you do not know, I work full time in Treasury Management and do consulting on the side. Would love to chat or network with you about it.

Some of those services are listed below that we can help you with!