Does financial information have to be so confusing?

The reporting of the credit crunch will no doubt have left many of you confused. Some interesting terms have been used by financial commentators like Robert Peston to describe the liquidity crisis within the financial sector.

For many non-financial people this makes the prospect of making sense of financial information daunting.

To understand the information presented in Profit and Loss Statements, Balance Sheets and Cash Flow Statements you need to know what is meant when people talk about assets, liabilities, income and expenses. Once these are properly understood you have the basis of understanding a Balance Sheet and a Profit and Loss Statement.

The purpose of a Balance Sheet is to state the value of the organisation at a particular point in time which is represented by its assets and liabilities at that moment in time.

The purpose of a Profit and Loss Statement is to report whether for a particular period of time the organisation has made a profit as a result of its income exceeding its expenses for that period.

The source of confusion is that in financial terms income does not usually mean that money has been received and expense does not usually mean that money has been spent. When organisations trade with their customers and suppliers on a credit basis, accountants measure income at the time it is generated by the sale of goods or services whilst they measure expenses at the time the cost is incurred.

It is the purpose of a Cash Flow Statement to indicate what amounts of money have been received and spent during a particular period of time.

It is so important that people understand the fundamentals of finance. If nothing else it will enable them to make sense of the interesting terms used by financial commentators.

Understanding the Fundamentals of Finance

To help people make sense of financial information we present The Fundamentals of Finance which is widely accepted as one of the best seminars available. It quickly removes the fear that some people have regarding finance, it takes what some people perceive to be complex accounting terms and puts them into a context that enables non-financial people to readily understand them. The session is very entertaining, it is not a dry lecture, it is a highly interactive training session presented by a dynamic accountant. The high impact presentation makes fascinating use of video clips and is delivered in three hours. Rest assured people learn a tremendous amount in a very short period of time, and what is more you will get outstanding value for money - all this for £95+VAT.

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