Financial Estimation — Financial Reports Brief Intro for Startup

In the previous article, we took a glance at the business pitch deck and the content included. Among those criteria, financial prediction is definitely one of the most critical parts, which also plays a crucial role while running the business. Thus, we are going further to talk about how to make a reasonable financial prediction.

To start with, we have to understand the two most fundamental and important financial reports, the income statement, and the balance sheet. In this article, we would explain the basic knowledge of these two reports and leave the step by step estimation to the next article. If you are not familiar with accounting, there is nothing you need to worry about, all the concepts are easily-understanding and we only focus on how to facilitate these reports to make estimations. Feel free to comment if you have any question.

This is a brief explanation, some transactions/financial activities won’t be count as part of the income statement, which I will explain later.

Income Statement

The income statement shows the “dynamic change” correlating to your financial activities. To be more specific, there are two major parts, the first part is all the activities directly related to your revenue generation, and the other part is the operations activities, those things needed to be done even though you are not making profits.

• Revenue-Generating Activities: Revenue and Direct Cost