In fact, 60%–75% of businesses that went bankrupt (in France and England) were profitable*
So, what is the problem with analyzing a balance sheet and an income statement?
Consider a company that:
- has high, growing revenues 💴
- shows a positive bottom line 💴
- has moved from losses to generating a profit 💴
At first glance, everything looks fine—but once you start analyzing the financial ratios, the picture changes completely:
- A loss the previous year.
- A profit of over 5 million PLN the following year.
The result: Most people stop their analysis at this point.
-> Today, that company is in liquidation. 🔔
This highlights the core issue: no one examined the periodic financial reports and ratios in the right way.
The problem is that:
- the focus was solely on profit 🚩
- the method of financing was overlooked 🚩
- cash flows were ignored 🚩
This is exactly what happens most often in practice. The key is knowing what to look for—and in what order. 💡
Because analyzing monthly reports and financial statements isn’t just about whether there is a profit.
You need to calculate a few key parameters to see what is actually happening within the company.
In our Accounting office, in addition to our accounting services, we support entrepreneurs with comprehensive financial analysis, which includes:
- identifying early warning signs within monthly reports to prevent unpleasant surprises from surfacing only when the final financial statements are prepared ✅
- uncovering any overlooked details ✅
- analyzing data to detect early indicators of a potential crisis within the business ✅
* (source: Maria Sierpińska – ‘Cash Flow Management in a Business’)
Below is an example of a periodic report (monthly, quarterly, or annual) based on sample data:
