We know about investors' psychology. We know how the herd can overturn a single stock in a single day, whether it is a budding IPO or an old-timer.
How about risk? How do we perceive it? Do you perceive risk the way that I do? Did I perceive it the same way that I perceived it a decade ago? Will I perceive it the same way that I do a decade hence?
Some reflection on these questions is necessary ... for inevitably, your responses will differ from mine.
When cash outflow is not expensed entirely in the month of its occurrence, there could be various reasons. Insurance, dues and subscriptions, event planning for conferences, software. These are all instances of cash outflows that need to be divvied up over the months of the year.
This is due to the fact these are termed prepaid expenses or prepayments on the current asset section of the balance sheet. The reason these are "assets" is that the business has paid for these in advance, and therefore, will accrue benefit for this outflow at a later period, or for the remaining eleven months of the year.
It is extremely important that prepaid expenses are reconciled at year-end. For year-end reconciliation, please contact me #TrushaDesai.com
As a small business owner, it is important to study our business financial statement package on an ongoing basis: it could be monthly (preferably) or quarterly. The annual audited statements that are provided by the accountant are extremely important, but if we wait for an entire year before analyzing our cash flow, budgetary variance and profit, it might be too late to prevent a ship from floundering.
The financial statement package consists of two important documents: the balance sheet and the income statement. There is one magic number that is the same on both statements. And that is, profit.
Please contact me #TrushaDesai.com for discussion of your financial statements.