Finance & Cash Flow
Your CA prepares the statements. Somebody still has to read them, and that somebody is you.
Many owners sign accounts they have never been taken through, and lenders, partners and investors read them very closely. This session explains the three basic statements in plain language, with a made-up example, then shows a handful of comparisons that tell an owner more than the whole page of figures.
Explore this page6 sections
Accounts are the business's report card. Few owners are taught to read them.
The statements show what the business sold, what it spent, what it owns, what it owes and where its cash went. Banks, large customers and potential partners read them as a matter of routine. An owner who cannot read them depends entirely on what others say about them.
Reading is much simpler than preparing. You do not need to know double-entry bookkeeping to notice that receivables have doubled while sales rose by a tenth, or that the business is paying more in interest than it earns after costs. This session teaches that kind of reading, and only that.
What the session covers
29 topics across 6 areas. Three statements, a few comparisons, and the questions that follow.
The Profit and Loss StatementWhat happened over the year, in order.5
A made-up example with round numbers is read line by line: sales of ₹1 crore, gross profit of ₹30 lakh, and a net profit of ₹6 lakh. The session shows what each step tells you.
- Sales or revenue at the top
- Cost of goods sold, and what is left as gross profit
- Operating expenses: wages, rent, marketing, other costs
- Interest, depreciation and tax, in outline
- Net profit at the bottom, and what it does and does not mean
The Balance SheetWhat the business owns and owes on one day.5
- Assets: cash, money owed to you, stock, equipment, other
- Liabilities: money owed to suppliers, banks and others
- The owner's capital and retained profit
- Why both sides always equal
- Short-term against long-term items
A proprietorship's accounts may look different from a company's. Ask your CA how yours are prepared.
The Cash-Flow StatementWhy profit is not the same as money in the bank.5
- Cash from running the business, from investing and from financing
- Why a profitable year can still show cash going down
- How growth in receivables and stock eats cash
- Loan repayments and drawings by the owner
- Where to find it if your accounts do not include one
Four Comparisons Worth MakingA statement means more next to another number.4
Each comparison is a simple division. The aim is to see direction: better or worse than last year, and why.
- Gross margin: gross profit as a share of sales, this year against last
- Net margin: net profit as a share of sales
- Days of receivables and days of stock, as in the working-capital session
- Debt against the owner's own capital
What Lenders Look At FirstReading the accounts as the bank will.5
- Whether the business earns enough to meet its repayments
- Trend in sales and profit over several years
- How much the owner has put in
- Existing loans and how they are serviced
- Whether the figures match the GST returns and bank statements
Different lenders look at different things. Ask the lender what it needs, and your CA how to present it.
Questions for Your CATurning the reading into a conversation.5
- Why did this line change so much from last year?
- What is included in “other expenses”?
- Are there amounts that look like profit but have not been collected?
- What would you change in how we keep records during the year?
- What can be provided monthly, so the year-end holds no surprise?
What participants work through
- The made-up statements, read in the order taught
- Their own last statements, or a bank statement and sales list if they have none
- Four comparisons worked out on their own figures
- Three questions each to ask their CA
What this session is not
- A bookkeeping or accounting course
- An audit, a valuation or a credit assessment of any business
- Tax or legal advice, which belongs with a CA
- A judgement on any individual accountant's work
How the session runs
Two to three hours. A finance practitioner, ideally a chartered accountant, reads the made-up statements aloud with the room, line by line, then participants repeat the exercise on their own latest accounts, which they are asked to bring as paper or on a phone. Confidential figures need not be shared with anyone; the work is done privately and questions can be asked in general terms. The session gives general education and does not replace advice from the owner's own CA.
What your students leave with
- What the profit and loss statement, the balance sheet and the cash-flow statement each answer
- A reading order for each statement: the few lines to read before the rest
- How to calculate and compare gross margin, net margin and days of receivables
- An understanding of why profit and cash are shown separately
- What a bank or other lender looks for first in a set of accounts
- A list of questions to ask their CA about their own statements
Scheduled sessions
Nothing scheduled yet
Sessions are arranged with a college once a date is agreed. Ask us and we will find the right person for it.
A student rather than a college? See what is coming up, or ask your placement team to host this.
You do not need to prepare the accounts. You do need to be able to read them.
Tell us who your students are and what stage they are at. Sessions are free for participants.