Do Business Well

Income statement. You’ll want to produce one every month. Your business can be in big trouble for a long time and you won’t even know it without an income statement. We have fully detailed the income statement in section 2, part 6.

Inventory. This is the value of all merchandise that you carry for resale. It does not include office furniture, production equipment, or other items that aren’t being offered for sale. As mentioned above, there are some very sophisticated aspects to placing a value on that inventory. Continue Reading »

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BOOK VALUE

Each month or quarter you should be determining the company book value. This is the net worth figure on your financial statement. It’s the difference between your total assets and total liabilities using all the rules of accounting and taxation. As you’ll see, this has very little to do with the actual worth of your company.

LIQUIDATION VALUE

You would only rarely want to sell a successful business for less than liquidation value. You might do so to provide continued employment for loyal staffers, or some types of deals might include your continued employment or the receipt of certain royalties unrelated to the sale price. You arrive at the liquidation value by adjusting each asset to take into consideration its real value, as opposed to its book value. Next, you adjust liabilities to account for any amounts that aren’t going to be realized. Finally, there’s a cost of liquidation. Let’s look at all three for some examples: Continue Reading »

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