Technical bullshit

Question 1

Walk me through the 3 financial statements.

Answer 1

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, the final line on the statement.
The Balance Sheet shows the company’s Assets – its resources – such as Cash, Inventory, and PP&E, as well as its Liabilities – such as Debt and Accounts Payable – and Shareholders’ Equity. Assets must equal Liabilities plus Shareholders’ Equity.
The Cash Flow Statement begins with Net Income, adjusts for non-cash expenses and working capital changes, and then lists cash flow from investing and financing activities; at the end, you see the company’s net change in cash.

Question 2

Can you give examples of major line items on the income statement?

Answer 2

Income Statement: Revenue; Cost of Goods Sold; SG&A (Selling, General &
Administrative Expenses); Operating Income; Pretax Income; Net Income.

Question 3

Can you give examples of major line items on the balance sheet?

Answer 3

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

Question 4

Can you give examples of major line items on the cash flow statement?

Answer 4

Cash Flow Statement: 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.

Question 5

How do the 3 statements link together?

Answer 5

“To tie the statements together, Net Income from the Income Statement flows into Shareholders’ Equity on the Balance Sheet, and into the top line of the Cash Flow Statement.
Changes to Balance Sheet items appear as working capital changes on the Cash Flow Statement, and investing and financing activities affect Balance Sheet items such as PP&E, Debt, and Shareholders’ Equity. The Cash and Shareholders’ Equity items on the Balance Sheet act as “plugs,” with Cash flowing in from the final line on the Cash Flow Statement.”