In Balance Sheet there is a lot of KPI (if you know what you are looking for). it will involve in a lot of simple math calculations; which means it is not something visible that you can spot. 1^st of all, a key point in understanding Balance Sheet is that it is often hard to assess a it in isolation. Having something to compare it to is the key to understanding what’s happening and what has changed. Having a comparison period makes more sense as you.

As entrepreneur, you’ll probably ask “why it is important for me to understand the Balance Sheet?”. Here’s my take on the importance;

1. With the comparison & coupled it with relevant KPIs, Balance Sheet is a source of information for investors. So if you want to impress your potential investors, like how you wanted to impress your future mom-in-law, you will need to learn how to dress up!
2. KPI’s will be used to compare to industry average, so you will know how your company’s performance fare against the market/competitors.
3. Identifying areas of risks where a focused attention is needed, ie slow moving stocks, working capital issues or even cashflow issues.
4. These KPIs will be useful when you are preparing for cashflow forecasts, as all forecasts needed a basis for the estimates. We DON’T pluck the numbers from thin air.

Next, we will go thru the terms & the concept behind it as well as the importance. We will cover the calculations in the near future (as it will be even more confusing)