Trump University Entrepreneurship 101: How to Turn Your Idea into a Money Machine, Second Edition

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Project Your Growth

and Profitability

M

oney (also referred to as cash or capital) is literally the fluid of life for

your business. If ever your Money Machine is drained of this vital fluid,

the game is over. This is not something you can leave to chance. You must

gain a working knowledge of financial statements

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and understand what they

tell you about the well-being of your business. If you are not familiar with

financial statements, do not be concerned. They will be demystified as we go

through them step-by-step. In this chapter, you learn about four quantitative

tools you can use to understand your business.

1. The cash flow statement tells you how much cash moves into and out

of your business over a particular time period, and how much cash

remains. It also defines where the cash came from and where it went.

2. The balance sheet answers the question: What are my assets, liabili-

ties, and net worth of my business at any moment of time?

3. The income statement (also known as statement of profit and loss)

measures the profitability of your business over a stated period.

4. Breakeven analysis tells you what level of sales will cover your

expenses.

Cash Flow and Grandma

My grandmother Anna understood cash flow very clearly. Her husband, Saul,

earned a meager living as a cobbler in Lithuania during the time of the

Russian Revolution. Mustering all of their courage, Saul and Anna fled from

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