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You run a business and want to read your own accounts

Steering my business by the numbers

Read a balance sheet and a profit and loss account for what they actually say, work out the ratios that matter, find the turnover at which the business becomes profitable, measure cash generation — and see what the business is worth by comparison. 9 steps, from the financial statements to the decision.

Start here: Reading your accounts to steer the business

Understand: what the balance sheet and the P&L actually say

  1. Step 1 of 9
    CoursePaid individually51 min

    Reading your accounts to steer the business

    The income statement, the balance sheet and the intermediate management balances, read in the order they serve decisions. Three worked modules following Nadia's workshop and its €480,000 turnover. First course of the management accounting series.

Measure: ratios, break-even point, margin and mark-up, cash generation, valuation

  1. Step 2 of 9
    CalculatorFree result

    Financial ratios

    Enter nine figures read off your annual accounts: you get the net margin, return on assets and return on equity, the financial autonomy ratio, the debt-to-equity ratio, the repayment capacity in years and both liquidity ratios, each with its division shown.
  2. Step 3 of 9
    CalculatorFree result

    Break-even point and break-even date

    The break-even point is the minimum turnover that allows a business to make a profit: it is fixed costs divided by the contribution margin ratio. The break-even date is the point in the financial year when that turnover is reached.
  3. Step 4 of 9
    CalculatorFree result

    Margin, markup and coefficient

    From a net-of-VAT purchase cost and a starting point of your choice — selling price, multiplier coefficient or target markup rate — the calculation returns the gross margin, the margin rate, the markup rate, the multiplier coefficient, the selling price excluding and including VAT, and the VAT collected.
  4. Step 5 of 9
    CalculatorFree result

    Cash flow from operations (CAF)

    Pick your starting point — net income or gross operating surplus — then enter the items to be restated: you get the cash flow from operations, the amount retained after dividends, its share of revenue, and your debt repayment capacity in years.
  5. Step 6 of 9
    CalculatorFree result

    Valuation by multiples

    Pick the aggregate, enter its amount and the multiple your comparables support: you get the enterprise value, the net financial debt, the equity value and, if you are valuing a block, the value of your stake.

Find your way around the filed statements: balance sheet assets and liabilities, P&L

  1. Step 7 of 9
    FormFree30 min

    French Cerfa 2050 — balance sheet assets

    Form 2050 (balance sheet assets, standard regime): fixed assets, inventories, receivables and cash line by line — guide, worked example and consistency checks.
  2. Step 8 of 9
    FormFree30 min

    French Cerfa 2051 — balance sheet liabilities

    Form 2051 (balance sheet liabilities, standard regime): equity, provisions and debts line by line — guide, worked example and the cross-check with form 2053's result.
  3. Step 9 of 9
    FormFree30 min

    French form 2052 — income statement of the tax package (operations)

    Operating income and expenses in the French tax package: what form 2052-SD is for, who files it, line by line, and its consistency with VAT and form 2053.

The other paths

A different procedure, the same principle: the three pillars in order.

Read in French