by Brian Bodker, Principal
Earlier this month, I had the opportunity to present “Financial Acumen for Private Company General Counsel” to the Women’s General Counsel Network, a group of in-house legal leaders who work for or with private equity sponsor firms and their portfolio companies.
Our discussion focused on helping general counsel understand how financial statements tell a story about a company’s performance, risk, and value, a story they must be able to interpret and explain to boards, investors, and management teams. But this knowledge isn’t just for lawyers. Anyone in a leadership role, whether you oversee legal, operations, marketing, or HR, benefits from understanding how financial data connects to strategy and decision-making.
Financials Are More Than Math
Financial statements are like chapters in a story. The balance sheet shows what your company owns and owes at a single point in time. The income statement reveals how effectively you’re generating profit from your operations. The cash flow statement explains where money came from and where it went. And the notes highlight critical details such as accounting policies, loan terms, or customer concentrations.
When read together, these statements give a clear, data-backed view of your company’s financial health. Leaders who understand how to read and question them can spot red flags early, anticipate challenges, and make more confident decisions.
Where Law and Finance Intersect
For general counsel, this financial fluency is essential. The way contracts are structured affects revenue recognition. Debt agreements can restrict future borrowing or acquisitions. And in mergers or acquisitions, financial literacy allows legal leaders to spot potential pitfalls before they become costly surprises.
The same holds true for business owners and executives: knowing how financial and operational decisions overlap is key to protecting long-term value and credibility.
The Red Flags That Matter
Financial information and statements provide key hints and trends. Unexplained dips in profitability, rising accounts receivable, or shrinking cash reserves often signal inefficiencies or emerging risks. On the flip side, consistent improvements in cash flow, margins, or retained earnings tell a story of strength and stability. The key is to recognize patterns over time and understand what they say about the company’s operations and strategy.
Financial Literacy Is Leadership
Financial understanding isn’t just an accounting exercise; it’s a leadership skill. When you can speak confidently about working capital, EBITDA, or deferred revenue, you gain credibility with investors, peers, and clients. You also build better partnerships across departments because you understand the financial impact of every strategic decision.
For general counsel, this knowledge bridges law and leadership. For everyone else, it’s the foundation of smart, sustainable business growth.