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 equals 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. Thus, analyzing a balance sheet can reveal a lot about a company's size, strength and liquidity.
• 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. If a business is profitable, it will show up on the income statement under net profit. Even if the income statement shows a net loss, however, depreciation and other non-cash expenses could be a hidden source of funds.

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're important sources of information during a sale and can locate dollars to implement solutions to the prospect's needs and concerns.

You'll learn from experience the amount of insurance to recommend, and for whom. Each situation will be different; however, in these cases it's probably smart to base insurance face amounts on a money-purchase approach. That is, the amount of insurance which can be provided by the dollars available for premiums. The income statement provides a guide, since a portion of retained earnings might be available for business life insurance premiums. Although the income statement can spotlight the need, it may still be necessary to calculate some balance sheet ratios to determine the upper limits of premium dollars available.