About a year ago, I wrote about the importance of having a personal income statement, personal balance sheet, and personal cash flow statement. I then tied it all up with a look at what personal financial statements mean.
To recap what I said in that post, here is a brief rundown of what each statement means from last year’s post:
The Personal Balance Sheet gives us our liquidity position. To analyze the information here, take a look at the quick ratio and acid test. If your current assets do not meat or exceed your current liabilities you need to make a quick change to your financial situation.
The Personal Income Statement tells you how much you are making in a given period in the form of a net income. A high net income means you have a good income/spending gap. A negative net income means you are spending more than you make and should make a quick lifestyle change.
The Personal Cash Flow Statement gives you a breakdown of your cash position in a period. It is okay for you to have a negative cash flow in some instances, such as paying down debt. If you do this for too long, however, you will end up in trouble with debt.
What they can tell you is still as relevant as ever:
Stock analysts grade companies every day and give them ratings for credit worthiness and investment grade. Compare yourself to publicly traded companies by calculating their quick ratio, return on assets, and profit margin. It is a fun exercise to see your total financial health.
In the comments, tell us what your stock would be worth. Would Jim Cramer be bullish on an investment in you?
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