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What Your Balance Sheet Says About Your Ohio Business

What Your Balance Sheet Says About Your Ohio Business

10 Mar 2022

As our population is striving for “healthy work-life balance,” similarly, we believe in a holistic approach to finance. Your personal balance sheet can serve as a valuable enterprise roadmap, working as a whole system, whether it be for your retirement plan or investment strategy. If you don’t know where you’re going, how will you know when you get there? Read on to learn how McGervey financial services differ from the standard approach. Our planning investment management is what sets us apart.

 

Evaluate Your Financial Potential with a Canton, OH Financial Advisor Today!

 

When exploring your personal financial standing, you will start by looking at your balance sheet. In building your personal balance sheet in the context of business objectives and capital needs, your value is not set aside. Again, our method is not the standard, isolating personal wealth from your business value. 

McGervey Methodology to Wealth-mapping for Business Owners

  • Understand what’s most important to you and your family
  • Discover your true risk tolerance
  • Address all parts of your financial life proactively and comprehensively
  • Reduce your tax burden 
  • Pursue opportunities to minimize taxes using different qualified plans
  • Look for hidden blind spots and vulnerabilities 
  • Dig deep into all aspects of your financial life 
  • Find the best strategies to increase your wealth and save money
  • Execute tax strategies to reduce what you owe
  • Initiate cash flow optimization
  • Look at estate planning to pass on your wealth efficiently
  • Stress-test the plan under a variety of conditions
  • Fine-tune your plan and investment allocations

Our fee-only financial advisors in Canton, Ohio, study your income sources, assets, liabilities, personal cash flow, taxes, and much more. Financial goals compared to your risk tolerance make sense. This helps us design a financial planning and investment wealth map that most efficiently takes you from where you are to where you want to be. 

Balance Sheet Simplified

Your balance sheet summarizes finances, revealing your current financial position. It’s your “book value.” Companies create a balance sheet at the end of a specific reporting period, whether at the end of a month, a financial quarter, or a calendar year. 

You probably do the same with a monthly budget at home. This financial statement accounts for what your business owns (asset), financial obligations (liabilities), and the money remaining for the owners (owner’s equity).  

Business Balance Sheet Components

The figures on your balance sheet display your company’s financial success and failure. This can relate to the amount of time, effort, and capital you put into your company. Balance sheets detail the level of debt accumulated while comparing assets to liabilities.

The information on your balance sheet simplifies calculating critical financial ratios, including the debt-to-equity ratio, demonstrating your company’s ability to cover financial obligations with equity. 

Your balance sheet provides the proportion of current assets divided by current liabilities—this ratio details whether the business can pay its debts in the ensuing year. Companies also compare their balance sheets to past ones to determine how finances have changed as time progresses.

How to Calculate Your Company’s Net Worth

Your business’s net worth is the difference between the value of the assets owned and the value of financial obligations. Your net worth figure is a measurement of wealth as it symbolizes what’s left after financial debts are satisfied. 

Crunching the numbers and your company’s balance sheet might reveal you are deep in the black, in the red, or hovering around a break-even point. In business, being in the black refers to generating a profit. 

 

Let a Canton, Ohio Financial Advisor Help You Evaluate Your Company’s Net Worth!

 

Businesses in the red owe more than they own, meaning they’re in debt. Negative net worth isn’t as concerning as most believe, especially if your company is still in its infancy. 

Amazon spent years in the red before transitioning into the black. So don’t get discouraged if you haven’t broken through yet. A Canton, OH financial advisor can help you do so.

If your business balance sheet reveals you’re in the red, take action to add to your assets and reduce your liabilities. If you’d like to make headway toward a timely transition to the black, boost your cash or make strides to hike the value of the assets you own. 

If you attempt to reduce your financial obligations by selling equipment or part of the business, it would decrease your assets and potentially offset any financial benefit you obtained by lowering your debt.  

Financial Advisors in Ohio, can quickly help your business transition from red to black. Tap into the power of wealth management strategies to boost your business’s profitability as well as your finances. 

Owner’s Equity in Business Sheets

Owner’s equity is what remains for you, the business owner, after financial liabilities are satisfied, what you have invested in the business. The comparison of owner’s equity from one period to another reveals how the investment in the industry has fared. Your balance sheet shows the level of owner equity by subtracting withdrawals from the value of cash and property invested into the business. 

Compare your balance sheets across posterity, and you might find that your owner’s equity gradually decreases. If you notice such a reduction, lean on our financial planning team in Canton, OH. We help strategically plan, make alterations, address financial obligations and bolster your owner’s equity in the short-term and as time progresses.

Balance Sheets for Taxes and Lending

Your balance sheet provides insight into your company’s profitability, net worth, cash-on-hand, and additional quantitative information. Your business also requires a balance sheet to secure a loan, obtain investment funding and attract potential buyers.

Your balance sheet can give investors an idea of your company’s financial position because it can lay out what it owns and owes. 

Though few people aside from our financial advisors in Canton know it, only C corporations are legally mandated to create a balance sheet component of the yearly federal tax return. Such a balance sheet compares items toward the start of the year with those at the year’s end. 

The IRS mandates that C corporations’ balance sheets are submitted with Form 1120. If the balance sheet is not in full accordance with the business’s records and books, you could be audited.  

Financial advisors in Canton navigate the tax maze for you. We have informed several local Canton business owners that small corporations with aggregate assets and receipts less than a quarter-million dollars at the year’s end do not have to submit a balance sheet when submitting a tax return.

Let’s say your business requests an SBA 7(a) loan above $350,000; you must submit an accurate and up-to-date balance sheet to be considered for approval.  

A trusted, fee-only investment advisor is ready to connect. Schedule your call! Business financial planning in Ohio starts with our CERTIFIED FINANCIAL PLANNER™ Professionals at McGervey Wealth Management help strategically implement investment management techniques designed for you.

 

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More About the Author: Matthew McGervey, CFP®, MBA

As a CERTIFIED FINANCIAL PLANNER™ professional, Matthew has a broad knowledge of personal financial planning strategies and solutions.