Financial Statements and Cash Flow

The 3 major financial statements are the Income Statement, Balance Sheet and Cash Flow Statement. The Income Statement gives the company's revenue and expenses, and goes down to Net Income.

Walks through how revenue turns into profit

Shows a company's assets, liabilities and equity at a specific point in time.

Details changes in cash balance over a period.

Revenue; Cost of Goods Sold; SG&A; Operating Income; Pretax Income; Net Income.

Cash; Accounts Receivable; Inventory; Plants, Property & Equipment (PP&E); Accounts Payable; Accrued Expenses; Debt; Shareholders' Equity.

Net Income; Depreciation & Amortization; Stock-Based Compensation; Changes in Operating Assets & Liabilities; Cash Flow From Operations; Capital Expenditures; Cash Flow From Investing; Sale/Purchase of Securities; Dividends Issued; Cash Flow From Financing.

Net Income from the Income Statement flows into Shareholders' Equity on the Balance Sheet, and into the top line of the Cash Flow Statement.

Items appear as working capital changes on the Cash Flow Statement, and investing and financing activities affect Balance Sheet items

Shows how much cash a company is generating, independent of non-cash expenses.

An asset going up decreases your Cash Flow, whereas a Liability going up increases your Cash Flow.

It is tax-deductible. Reduces the amount of taxes you pay

Operating Expenses on the Income Statement go up by $10, Pre-Tax Income falls by $10, and Net Income falls by $6

decreases your Cash Flow from Operations – it goes down by $10, and has no change on the Income Statement

Expense is recorded only when the goods are sold.

No changes on the Income Statement (yet). PP&E is up by $100 and Assets is therefore up by $100. debt is up by $100 as well. cash number stays the same.

Operating Income decrease , decrease Pre-Tax Income , Net Income fall by $12, Net Income at the top is down by $12 and Cash is down by $2

At the start of Year 3, factories breaks down, Asset decrease by $148

owner of the company has taken out a large portion of its equity or losing money consistently

ability to pay off its short-term liabilities with its short-term assets

company is able to pay off their Accounts Payable rather than keeping a large cash balance on-hand

shows up in the Pre-Tax Income line. With a 40% tax rate, Net Income declines by $60. Cash Flow remains

shows up on the Income Statement, Cash Flow from Financing goes up by $100 to reflect the government's investment Cash is up by $100 so Assets increase

you record it as a gain on the Income Statement so Pre-Tax Income goes up by $100 and Net value increases and Cash decreases

collect cash upfront to ensure stable revenue makes investors happy as well since they can better predict a company's performance.

It is recorded as a liability.

has not yet been collected in cash from customers, whereas deferred revenue has been.

30-60 day range though it's higher for companies selling high-end items and it might be lower for smaller, lower transaction-value companies.

recognizes revenue and expenses when cash is actually received or paid out

recognizes revenue when collection is reasonably certain recognizes expenses when they are incurred rather than when they are paid out in cash.

Useful life is >1 year, capitalized, Depreciated or Amortized

companies have non-cash charges such as Amortization of Intangibles, Stock-Based Compensation, and Deferred Revenue Write-down

spending too much on Capital Expenditures, high interest expense and debt all mature on one date

the acquirer re-assesses its intangible assets and finds that they are worth significantly less than they originally thought.

acquires another company and pays more than what its assets are worth.

Cost of Goods Sold as a result, LIFO would also have lower Pre-Tax Income and Net Income ending for goods to expensive.

accrual-based but tax is cash-based. straight-line depreciation complex and more accurately tracks assets

arise from temporary differences between what a company can deduct for cash tax purposes vs. what they can deduct for book tax purposes.

Start with individual products / customers customers growth rate in sales and sale values