Financial statements are essential tools for evaluating your financial health, making informed decisions, and meeting legal or business obligations. They offer a snapshot of your assets, liabilities, and overall financial position. But when exactly do you need to have one prepared? In this blog post, the experts from Mark Dicus & Company dive into some key situations when you’ll want to get a financial statement ready:
Applying for a Loan or Financing
Banks, credit unions, and other financial institutions will often require a detailed financial statement before approving a loan or line of credit. Whether you’re a business seeking funding or an individual applying for a mortgage, lenders need to assess your ability to repay the loan. A well-prepared financial statement will include your income, debts, and overall financial standing, helping them evaluate your risk.
Business Partnerships or Mergers
If you’re entering a partnership or merging with another company, it’s crucial to have accurate financial statements prepared. These reports give potential partners a clear understanding of your company’s financial health. Full transparency can prevent future disputes and help determine the value of each party’s contributions.
Tax Filing & Compliance
Whether you’re a business or an individual, tax filing often requires a financial statement. For businesses, a balance sheet, income statement, and cash flow statement will help you comply with IRS requirements and avoid audits. Individuals, especially those with high income or complex assets, may also need a financial statement for tax filing purposes.
Selling or Buying a Business
When selling or buying a business, financial statements are crucial in determining the value of the company. If you’re the seller, you’ll need these documents to justify your asking price. If you’re the buyer, financial statements give you insight into the company’s profitability, debts, and potential for growth.
Investor Reporting
If your business has investors or shareholders, financial statements are essential for reporting purposes. Investors want to know how their money is being used and what return they can expect. Regularly prepared financial statements allow you to provide transparent updates on business performance, helping to maintain trust and attract future investment.
Estate Planning
A personal financial statement is often necessary when planning your estate. It helps you assess the value of your assets and liabilities, ensuring that your estate plan covers all financial aspects. Executors of estates will also need financial statements to fulfill their duties efficiently after your passing.
Meeting Legal Requirements
Certain industries and countries require businesses to regularly submit financial statements as part of regulatory compliance. For example, publicly traded companies are required to publish their financials annually or quarterly. Not meeting these requirements can lead to penalties, loss of investor confidence, or even legal action.
Assessing Personal or Business Financial Health
You don’t need a specific event to justify preparing a financial statement. Regularly reviewing your financial status can help you make informed decisions about budgeting, saving, or investing. For businesses, financial statements allow you to track profitability, cash flow, and areas that need improvement.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
Financial statements are critical in many situations, from securing a loan to planning your estate. Having one prepared by a professional ensures accuracy and helps you meet your financial goals. Whether you’re an individual or a business, understanding when to prepare a financial statement is key to managing your financial future. At Mark Dicus & Company, in accordance with professional standards can assist you in the preparation of your financial statements. Reach out to the professionals from Mark Dicus & Company today to get your financial statement written up for your needs.