Financial Statements Skills

Do you need financial statements skills to function well in your job role? This article provides a guide on how you can develop the skills and include them on your resume.

 

What are Financial Statements Skills?

Financial statements skills refer to the ability to understand, analyze, and interpret financial statements, used to communicate a company’s financial performance and position. These statements include the balance sheet, income statement, cash flow statement, and statement of shareholders’ equity.

The balance sheet, also known as the statement of financial position, provides information on a company’s assets, liabilities, and equity at a specific time. The income statement, also known as the statement of profit and loss, reports on a company’s revenues, expenses, and net income over a specified period. The cash flow statement, also known as the statement of cash flows, shows how a company’s cash has changed over a specified period and is divided into three sections: cash from operating activities, cash from investing activities, and cash from financing activities. The statement of shareholders’ equity, also known as the statement of changes in equity, shows how a company’s equity has changed over a specified period due to transactions such as the issuance of shares, dividends paid, and net income.

To have financial statement skills, one must be able to read, understand, and interpret these financial statements, and use them to make informed decisions. This may involve analyzing trends, comparing financial statements to industry averages, and identifying potential issues or areas for improvement. It also requires communicating financial information to others, such as management, investors, or other stakeholders.

Having financial statement skills is important for professionals in various roles, including accountants, financial analysts, and managers, as well as those in related fields such as banking, investment, and consulting. It is also important for small business owners and individuals to manage their finances.

 

Importance of Financial Statements Skills

  • Decision making: Financial statements provide crucial information to make important business decisions, such as to expand operations or invest in new equipment.
  • Planning and budgeting: Financial statements help businesses plan for the future by providing a clear picture of their current financial position, which can be used to create budgets and forecast future revenue and expenses.
  • Performance evaluation: You can use financial statements to evaluate a business’s performance over time, allowing managers to identify areas where improvements can be made and track progress toward goals.
  • Compliance: Financial statements are often required by law to be filed with regulatory bodies, and businesses must have the skills to prepare accurate and compliant statements.
  • Communication: Financial statements are used to communicate a business’s financial information to a wide range of stakeholders, including investors, creditors, and regulators.
  • Creditworthiness: Financial statements are used by lenders and investors to assess a business’s creditworthiness and ability to repay loans or generate returns on investments.
  • Risk management: Financial statements provide information that can be used to identify and manage financial risks, such as liquidity or solvency risks.
  • Benchmarking: Financial statements can be used to compare a business’s performance to industry benchmarks or the performance of other companies.
  • Negotiations: Financial statements can be used in negotiations, such as those involving the sale or purchase of a business, or the negotiation of loan terms.
  • Taxation: Financial statements provide information used in tax preparation returns and can help businesses identify tax planning opportunities and minimize their tax liabilities.

 

How to Improve your Financial Statements Skills

  • Study financial accounting principles: Start by learning the basics of financial accounting, such as the difference between assets, liabilities, and equity, and how they are reported on financial statements.
  • Read financial statements regularly: Review the financial statements of different companies to understand how they are prepared and presented. Pay attention to the details and try to understand what the numbers mean.
  • Take a course or attend a seminar: Consider taking a course or attending a seminar on financial statement analysis to gain a deeper understanding of the subject.
  • Practice analyzing financial statements: Use real-world examples to practice analyzing financial statements and interpreting the results.
  • Seek feedback and guidance: Consult with a financial professional or mentor to get feedback on your analysis and guidance on how to improve.
  • Stay current: Keep up to date with changes in accounting standards and regulations, and new tools and techniques for financial statement analysis.

 

Jobs that Require Financial Statements Skills

  • Financial Analyst: A financial analyst uses financial statements to evaluate a company’s performance and make investment recommendations.
  • Accountant: An accountant is responsible for maintaining a company’s financial records and preparing financial statements, including balance sheets, income statements, and cash flow statements.
  • Investment Banker: Investment bankers use financial statements to evaluate the financial health of a company and determine its potential for growth, which helps them to advise clients on mergers and acquisitions, initial public offerings, and other financial transactions.
  • Financial Advisor: Financial advisors use financial statements to help individuals and businesses make informed decisions about their financial future, such as retirement planning and investment strategies.
  • Credit Analyst: A credit analyst uses financial statements to evaluate a company’s ability to repay its debts, which is important for determining creditworthiness.
  • Risk Manager: A risk manager uses financial statements to identify and evaluate potential risks to a company’s financial health and to develop strategies to mitigate those risks.
  • Investment Analyst: Investment analysts use financial statements to evaluate a company’s performance and make investment recommendations.
  • Auditor: An auditor examines financial statements to ensure they are accurate and comply with accounting standards.
  • Corporate Finance Professional: Corporate finance professionals use financial statements to evaluate a company’s financial position, analyze its performance and make investment decisions.
  • Financial Planner: A financial planner use the financial statement to evaluate a client’s financial situation, create a financial plan and help clients achieve their financial goals.

 

How to Include Financial Statements Skills on Your Resume

  • Include a section on your resume specifically for financial skills, such as “Financial Skills” or “Finance Expertise.”
  • List specific financial software or tools you are proficient in, such as QuickBooks or Excel.
  • Mention relevant certifications or degrees in finance, accounting, or business administration.
  • Include any relevant experience working with financial statements, such as preparing, analyzing, or interpreting them.
  • Describe any experience with financial forecasting, budgeting, or cost analysis.
  • Highlight any experience you have with financial regulations and compliance.
  • Use industry-specific language and terminology to demonstrate your knowledge and understanding of financial concepts.
  • Provide specific examples of how you have used your financial skills to benefit your previous employers by quantifying the impact of your work.
  • Tailor your resume to the specific job you are applying for by highlighting the most relevant financial skills and experience for that role.

Overall, it is important to convey the skills, experience, and qualifications you have that are relevant to the financial statement. By providing specific examples and quantifying your impact, you can demonstrate to potential employers that you have the skills and knowledge needed to excel in a financial role.

 

Examples of How to Include Financial Statements Skills on Your Resume

Auditor Resume Sample

  • Conducted financial statement audits for several clients in the retail and manufacturing industries, utilizing advanced skills in GAAP and IFRS to ensure compliance and accuracy.
  • Led a team of auditors in performing detailed reviews of financial statements for a large financial services company, utilizing strong analytical and problem-solving skills to identify and address potential issues.
  • Reviewed financial statements for a variety of clients in the healthcare and technology industries, utilizing advanced skills in accounting and financial analysis to identify and address any potential issues or discrepancies.
  • Conducted financial statement audits for several non-profit organizations, utilizing strong analytical and problem-solving skills to identify and address potential issues or discrepancies.
  • Worked with a team of auditors to review financial statements for various clients in the real estate and construction industries, utilizing advanced skills in GAAP and IFRS to ensure compliance and accuracy.
  • Assisted in the preparation of financial statements for several small businesses, utilizing knowledge of financial reporting regulations and best practices to ensure compliance and accuracy.

Financial Analyst Resume Sample

  • Conducted financial analysis on the company’s financial statements to identify trends and areas for improvement, resulting in a 5% increase in profitability.
  • Prepared detailed financial reports and presentations for senior management, highlighting key financial metrics and variances from budget.
  • Created and maintained financial models to project future revenue and expenses, assisting in strategic planning and budgeting decisions.
  • Performed monthly financial statement reconciliation and ensured compliance with GAAP and company policies.
  • Developed and implemented financial statement analysis tools to improve the efficiency and accuracy of financial reporting.
  • Assisted in the preparation of financial statements and footnotes for annual audit and SEC filing.
  • Worked closely with the accounting department to ensure accurate financial statement reporting and timely filing of financial statements.

Risk Manager Resume Sample

  • Analyzed financial statements to identify potential risks and developed mitigation strategies to minimize their impact on the company.
  • Developed and implemented financial controls to ensure compliance with regulatory requirements and mitigate financial risks.
  • Managed and monitored the company’s budget and financial forecasting, identifying and addressing potential financial risks.
  • Conducted regular financial statement reviews to identify and address discrepancies or potential risks.
  • Worked closely with the accounting team to ensure accurate and timely financial reporting, identifying and addressing any potential risks.
  • Implemented and managed financial risk management protocols, including stress testing and scenario analysis.
  • Developed and maintained financial risk management policies and procedures to ensure compliance with regulatory requirements and best practices.
  • Provided training and guidance to team members on financial risk management principles and techniques.

 

How to Demonstrate Financial Statements Skills in an Interview

Understand the financial statements: Show that you understand the different types of financial statements, such as the balance sheet, income statement, and cash flow statement. Explain how they are interconnected and how you can use them to analyze a company’s financial performance.

Describe your experience with financial statement analysis: Share examples of how you have used financial statements to identify trends, evaluate performance, and make decisions.

Discuss your knowledge of accounting principles: Show that you are familiar with the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and understand how they are used in the preparation of financial statements.

Provide examples of financial modeling: Share examples of financial models you have created and explain how they were used to project financial performance or evaluate potential investments.

Show your ability to communicate financial information: Explain how you have effectively communicated financial information to stakeholders, such as management, investors, or customers.

Highlight relevant certifications and education: If you hold certifications such as CPA, CA, or CMA or have a degree in accounting or finance, mention these qualifications in the interview.

Share any experience with budgeting and forecasting: Explain how you have been involved in the budgeting and forecasting process and the impact of your work on the organization’s financial performance.

Show your knowledge of compliance and regulations: Explain your knowledge of relevant laws, regulations, and reporting requirements and demonstrate how you have ensured compliance in your previous roles.

 

Examples of Interview Questions to Test Financial Statements Skills

Can you explain the difference between a balance sheet and an income statement?

Guideline: Highlight the key differences, such as the balance sheet showing a company’s assets, liabilities, and equity at a specific point in time, while the income statement shows a company’s revenue and expenses over some time.

How do you prepare and analyze a cash flow statement?

Guideline: Explain the importance of understanding a company’s cash flow, the three sections of a cash flow statement (operating, investing, and financing), and the key metrics to look for when analyzing it.

Explain the process of creating a budget and the key considerations involved

Guideline: Discuss the importance of creating a budget, the steps involved in creating one, and key considerations such as forecasting revenue and expenses, setting financial goals, and assessing past performance.

How do you use financial ratios to evaluate a company’s performance?

Guideline: Discuss the importance of using financial ratios, the different types of ratios (such as liquidity, profitability, and efficiency ratios), and how they can be used to evaluate a company’s performance.

Can you explain the concept of working capital and how it is calculated?

Guideline: Discuss the importance of working capital, the formula for calculating it (current assets minus current liabilities), and how it can be used to assess a company’s short-term financial health.

Can you describe a time when you had to analyze and interpret financial statements for a company?

Guideline: Provide a specific example of when you had to analyze financial statements, the steps you took to do so, and the key insights you gained from the analysis.

How do you ensure the accuracy and integrity of financial records?

Guideline: Discuss the importance of accurate and reliable financial records, the steps you take to ensure their accuracy, and the importance of internal controls to maintain the integrity of financial records.

Can you explain the concept of “financial leverage” and how it can affect a company’s performance?

Guideline: Discuss the concept of financial leverage, how it is calculated (total debt divided by total assets), and the potential impact on a company’s performance, such as increased risk but also increased returns on equity.

 

Resume Skills