First, understand the income or profit and loss statement is not the same as cash flow. These are valuable analytical tools but only measure performance at a specific moment in time.


The annual report is the best source for this kind of information. Be sure to read the shareholders letter, as well as the presentations of the company’s product lines. Those are also part of the company’s SEC filings.

Short-term debt includes your car and student loans, as well as your credit cards and other forms of debt. Essentially everything except for your mortgage. You need to list all your outstanding liabilities and their respective minimum/monthly payments. Now add up the minimum/monthly payment amounts and you come up with a figure.

ACCOUNTS: Business activities cause increases and decreases in your assets, liabilities and equity. Your accounting system records these activities in accounts. A number of accounts are needed to summarize the increases and decreases in each asset, liability and owner’s equity account on the balance Sheet and of each revenue and expense that appears on the income Statement. You can have a few accounts or hundreds, depending on the kind of detailed information you need to run your business.

Real estate investing can come with a lot of surprises, especially on the financial end of things. Before you invest in property, make sure you completely understand the financial statements. You should be able to regurgitate the statements and explain them in laymen terms to anyone. This is critical to your success. You don’t want to be surprised with operating costs, vacancy costs, or taxes. If you are working with an account, ask to see the cash flow examples and have it explained to you. By knowing and understanding the financial end of things, you can head off bad investments.

When calculating P&L, one needs to ensure they are doing it in correspondence with the fiscal year. The fiscal year for a P&L is not determined by a calendar year, or by the lease year, but it can be. However, doing the P&L by the latter usually results in misleading information. Another element to consider is Capital. If a cost is capitalized then the amount is depreciated and spread over a period of time instead of being reflected on the P&L of the first fiscal year. In this way the P&L can, often times, reflect a lower cost for the year than the Cash Flow.