Financial Statements Flashcards
What are the 3 financial statements?
Balance sheet, Income Statement, Statement of Cash flows
What information does the balance sheet give?
Information about the financial position at a specific point in time
What information does the income statement give?
information about the financial performance during a period of time
What information does the statement of cash flows give?
information about the sources and uses of a firm’s cash during a period of time
What is the balance sheet’s equation?
Assets = Liabilities and Shareholder’s Equity
What are assets?
What the company owns
What are liabilities?
what the company owes
What is the stockholder’s equity?
the difference between a firm’s assets and its liabilities
What is the income statement’s equation?
Net income = Revenues - Expenses
What does positive net income do to shareholder’s equity?
Positive net income increases shareholder’s equity
True or false: Earnings (Net Income) typically don’t equal the amount of cash the firm has generated.
True
What do we need to do to compute cash flows from operations?
1) add back non-cash expenses (e.g. depreciation and amortisation)
2) deduct investment expenses and changes in net working capital
