Ways to Measure Finance

There are several ways to measure finance. This is done to ensure that the business is doing right and is meeting its financial targets. Sometimes, this is measured in a monthly basis. In some companies, there is a quarterly business review in which the gains and losses are measured and from these data, action plans can be formulated that will specifically target pain area in the company that significantly impacts the financial aspect of the business.In many cases, corporate leaders measure their financial status by also measuring their company’s net worth.  This is a data driven approach that helps them drive the business and forecast how the rest of the fiscal year will be. The first thing to do here is to list all the largest asserts of the company. It is important in this part that the estimation of the assets’ worth is close to reality.  After this, the liquid assets are added. These assets include the cash available in bank accounts, whether they are savings or checking. Once all these are added, you now have the total assets.What needs to be done next is to calculate the liabilities of the company. Of course, this includes outstanding loans and leases. This may include mortgages if the company has not fully paid for its infrastructure. Add to these the direct debts of the company if there is any. Once this is done, the total liabilities of the company is identified. The liabilities should be subtracted from the assets to calculate the net worth of the business. If this hits negative, this means that the company is not in a smooth sailing status.Another approach to measuring financial growth is through the calculation of investment performance. This can be done to manage assets and make a financial forecast based on historical data and financial analysis. The first thing to do here is to set a timeline. Many companies do not measure financial strength on a monthly basis. What they do is to measure it quarterly but some may do it annually. For small scale businesses, a monthly assessment may be done to manage the business better. This is especially applicable to startup businesses.Records of the findings should also be kept. This is because financial analysis is not as simple as subtracting the difference between two figures. When in business, there will be a definite series of cash flow that will happen. This may be about taking funds out or putting funds in. either way, this will impact how the earnings are interpreted. In a simple scenario, let us say that $1000 was placed as a capital in an investment. After two months, the total asset has ballooned to $5000. However, on the second month, $3000 was added to the original investment. The question here is, did the company earn $1000 form the original investment or when the $3000 was added?Overall, to measure finance is to measure the business. Whatever comes out on the measurement is where the ultimate decision will be based. Directions will be taken and new approaches will be tried.