Table of Contents

Foreword


Chapter 1
Why should I care?
Who reads your financial statements? The list is long and includes people inside and outside your company. Internally, you use financial statements as benchmarks of success. Others use them to assess the risk of doing business with you.

Chapter 2
Three basic reports
Your accountants may prepare numerous reports, but the most important are the balance sheet, the income statement (P&L) and the cash flow statement. Some reports merely provide the details explaining those three reports.

Chapter 3
The profit-and-loss statement
The profit-and-loss statement, also called the income statement or earnings statement, calculates net profit for a given period of time by subtracting company expenses from revenues.

Chapter 4
The balance sheet
The balance sheet displays the company’s financial position at an instant in time, showing how a company’s assets break down among equity and liability.

Chapter 5
The cash flow statement
The cash flow statement — perhaps the most important financial statement for a small trucking company — measures sources and uses of cash for a given period of time and shows whether cash flowed to or from operations, investments or financing activities.

Chapter 6
Accrual, cash and tax basis
Accounting rules aren’t uniform. Some companies record revenues and expenses when commitments are made, others log them when cash actually changes hands and some adopt tax rules as the basis for accounting.

Chapter 7
Depreciation and loan amortization
Depreciation spreads your investment in equipment and facilities, as reflected in financial statements, over several years. The method you choose has real consequences for your company’s reported performance. Loan amortization is a totally separate issue, but it too affects your reports.

Chapter 8
What the accountant’s report tells you
Accountant’s reports ensure — to a varying degree — that your financial statements are accurate and complete. The three basic reports in increasing degree of scrutiny are a compilation, a review and an audit.

Chapter 9
Taxes and your type of business
The legal status of your business — C corporation, S corporation, limited liability company, partnership or sole proprietorship — has significant consequences for owners’ income taxes as well as the presentation of financial statements.

Chapter 10
Notes to the financial statements
Notes provide information not often apparent just by viewing the columns of numbers in the three basic reports. Reading them is usually necessary for financial statements to make sense.

Chapter 11
The supplementary information section
Supplementary information goes beyond the basics provided by the balance sheet, P&L, cash flow statement and even the footnote disclosures to provide a deep understanding of the details behind the numbers.

Chapter 12
Understanding financial ratios
Financial ratios put the numbers from a financial statement in a form that allows the reader to compare companies of different sizes and scopes. Accountants can compute common ratios and explain the normal ranges for each.

Chapter 13
Comparing your financials to others
Several publicly available information sources allow you to compare your company’s financial results and ratios to those of other trucking companies. Most prominent are reports published by Robert Morris Associates and the American Trucking Associations

Chapter 14
What do bankers look for?
Bankers use your financial statements as the principal tools for determining your ability to pay, your financial condition and your management performance — three of the six main factors in determining whether you receive a loan.

Chapter 15
What do owners and investors look for?
Although your company isn’t publicly traded and probably doesn’t have outside investors, you can gain valuable insights on your own performance by breaking your results down into the numbers investors want to see — earnings per share, value per share, dividends and return on equity.

Chapter 16
What do customers and suppliers look for?
Customers want assurance that you can grow smoothly. Suppliers want to know how quickly you pay your bills and whether other financial commitments might interfere with your payables. Both parties look to your financial statements for guidance.

Chapter 17
What does a CFO or controller look for?
Internal financial professionals look at your numbers in much the same way others do, but their priorities depend on their position. Controllers worry about day-to-day issues; chief financial officers take a more strategic view.

Chapter 18
What do company managers look for?
The monthly reports you get from your accountant may look nothing like the annual reports that
go to bankers and others. You and your managers want to see results by department, division or profit center.

Chapter 19
What financial statements don’t tell you
Financial statements are quite useful, but there are many things they don’t tell you — even things you assume they would. The reports won’t tell you, for example, what your company and its individual assets are really worth.

Chapter 20
Setting a financial reporting strategy
Designate someone to review the design of your existing financial statements to determine whether they satisfy the needs of your internal and external “consumers.”

Chapter 21
Staying on top of your financial reporting
Don’t just stick with what works now and assume it will work forever. Ask questions and consult books and websites for a continuing education.