Transworld Blog

From business brokerage to mergers and acquisitions; we are the business sale specialists.

All Posts

Balance Sheets, Cash Flow Statements, Income Statements, and Taxes: A Quick Overview

If you're in the process of buying a business, there's a whole lot of information to take in and digest. If you're not familiar with accounting terms and documents, it can be overwhelming, leaving you wondering just where to begin.

Here's a look at some of the basics of business financials and taxes that may provide some guidance about the questions to ask when buying a business.

Balance Sheet

When one talks about a company's financials, they are usually referring to three specific kinds of documents: balance sheet, income statement, and cash flow statement. The balance sheet is it a representation of the company's financial position at one specific point in time.BALANCE SHEETS, CASH FLOW STATEMENTS, INCOME STATEMENTS, AND TAXES: A QUICK OVERVIEW

It details the current value of all the company’s assets as well as all liabilities and debts. Through analysis of the data found on the balance sheet, you not only get a clear view of the company's net worth, but you can also assess its liquidity (the ability to convert assets to cash quickly) and solvency.

You can find out more about how to prepare a balance sheet by clicking here.

Cash Flow Statement

A company's cash flow statement measures how money came in and was disbursed over a specified time period to see how the cash on hand has changed. It looks at monies received from cash sales, accounts receivable, and cash from loans and credit, as well as disbursements made for such expenses as payroll, accounts payable, rent, loan repayments, and others.

You can find out more about cash flow statements and how to prepare one here.

Income Statement

An income statement, also sometimes called a profit and loss statement, is used to show a company's profitability over a certain period of time. By listing all of the revenues received, as well as all of the operating expenses, you can clearly see how much money the company made or lost during that time.

Cash flow and income statements are similar, however, an income statement takes into account non-cash items, such as the depreciation of fixed assets, like equipment, fixtures, furniture, and computers.

Click here for a quick tutorial on how to write an income statement.

Calculating Your Tax Liability

The IRS requires individuals, including sole proprietors and partners, who expect to owe in excess of $1000 in taxes at the time of filing to make quarterly estimated tax payments. The same is true of corporations that expect to owe $500 or more.

To estimate how much income tax may be payable on a company's revenues, you will need to estimate the adjusted gross income, taxable income, taxes, deductions, and credits for the year ahead. You may want to use the company's previous tax return as a starting point.

You'll find more detailed instructions, as well as a worksheet to help you with the process, on the IRS website.

If you’re interested in buying a business, browse through some extraordinary Minnesota opportunities now on Transworld's current listings.

Related Posts

PPP Loan Hurting Your Business Sale?

I Want To Sell But Have A PPP Loan  If your business has a PPP loan and you are selling all or part of the business, you may need approval from the SBA or the bank that handled your loan. You may also need to put the amount of any unforgiven portion into escrow at close. 

Is Buying A Business A Good Idea?

Yes!  Buying a business is a good idea.  Why?

Ten Steps To Selling Your Business

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

Your Goals Are Just the Beginning

Talk to one of our Advisors today about next steps.

Free Consultation

E-mail address

minnesota@tworld.com

Contact us

+(888) 290-5232

Confidential Consultation

Talk to an Advisor