Cash Flow Statement (Business)

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing what the business owns (assets), what it owes (liabilities), and the owners' equity. The fundamental accounting equation states that assets must always equal liabilities plus equity. Reviewing a balance sheet helps investors and business owners assess the company's financial health, liquidity, and ability to meet its obligations.

Income Statement

A financial statement that summarizes a company's revenues, costs, and expenses over a specific period, ultimately showing whether the business made a profit or loss. Also known as a profit and loss (P&L) statement, it is one of the three core financial statements used to evaluate a company's performance. The income statement helps business owners and investors understand where money is coming from and where it is being spent.

Working Capital

The difference between a company's current assets (cash, accounts receivable, inventory) and its current liabilities (accounts payable, short-term debts), representing the funds available for day-to-day operations. Positive working capital indicates that a business can cover its short-term obligations and invest in growth, while negative working capital may signal financial trouble. Managing working capital efficiently is critical for maintaining liquidity and ensuring smooth business operations.

Burn Rate

The rate at which a company spends its cash reserves, typically measured on a monthly basis, before it begins generating positive cash flow from operations. Burn rate is a critical metric for startups and early-stage companies that are investing heavily in growth before reaching profitability. Understanding your burn rate is essential for determining how long your company can survive on its current funding, which directly informs your runway.