While it may shock any CEO or accountant it is not too uncommon to hear an equine businessperson say, “I do not know where the money comes in from or goes. It just comes in and then gets spent” (Hollay- Farr, Heather. "Business Finances."). The reason this may shock or even scare any CEO or accountant is because how can a person who is running a business realize what enterprises are the most successful and would benefit the most from being invested in and which enterprises are costing the business more to have than they are brining in, if they do not know exactly how much money is coming into the business and from where (lessons, boarders, sales, etc) and how much money is being spent and what it is being spent on (labor, feeding lesson horses, feeding boarder horses, vet bills, insurance, farrier services, etc.). “It is important for a business to know what levels of cash are moving in and out of the business… It is about when money comes in and goes out” (Eastwood, Jensen, Jordon 83). There are three standard financial statements any business owner should be able to produce, check and update regularly. The three statements are balance sheet, income statement, statement of cash flows.
But what exactly are financial statement and why are they so important?
“Financial statements are a collection of reports about an organization 's financial results, financial condition, and cash flows. They are useful for the following reasons:
• To determine the ability of a…