Sales associates who can interpret financial statements are not only able to assess the strength of their prospects' companies, they can also discover needs and the dollars to help solve them.

Example: In a business continuation case, the owners agree that they need a buy-sell agreement, but they are not sure they can afford the insurance to fund it. By being able to analyze the company's financial statements, you may be able to find the missing premium dollars.

The two financial statements you will most often deal with are the balance sheet and income statement. Samples appear at the end of this section.

• The balance sheet details what the company owns (its assets) versus what it owes (its liabilities). Assets minus liabilities equal the firm's net worth. Thus, a balance sheet gives you a snapshot look at the company's financial strength as of the date the statement was prepared. By comparing current balance sheets with past balance sheets, you can see if a company is getting stronger or weaker, whether it is growing or not, and its debt position from one year to the next.
• The income statement (also called the profit and loss statement, or "P&L"), tells whether the company has had a profit or loss during the period covered.

The balance sheet and income statement indicate how the company did financially during the year, but also what it did with its cash and other finances. Thus, they are important sources of information during your analysis and can identify available dollars to implement solutions to the prospect's needs and concerns.

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