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Financial aspects
may not represent the easiest or most exciting component of business
management, but they are definitely necessary to evaluate the health
of your company and to ensure it will survive. To analyse the financial
health of your company, you should study three main financial documents:
Your income statement, balance sheet, and cash flow statement. Knowing
how to prepare and interpret these statements will enable you to
identify in what areas you are financially strong, and what areas
need changing. An NPV analysis for new ventures and projects can
indicate whether or not they will be profitable, and thinking in
terms of the cost of capital will give you a better understanding
of the financial world.
All businesses
need cash to operate, and this cash comes in the form of either
debt or equity. A business has to decide how much of each it will
use, and then decide what sources are available. It doesn't matter
how great your business model is; having enough cash to operate
should always be your primary concern.
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