Components and Relationships Between the Financial Statements
It is important to understand that the income statement, balance sheet and cash flow statement are all interrelated.
The income statement is a description of how the assets and liabilities were utilized in the stated accounting period. The cash flow statement explains cash inflows and outflows, and will ultimately reveal the amount of cash the company has on hand; this is reported in the balance sheet as well.
We will not explain the components of the balance sheet and the income statement here since they were previously reviewed.
Figure 6.13: The Relationship between the Financial Statements
Cash Flow Statement Basics
InvestingTune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
InvestingCash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
InvestingThe financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
InvestingFind out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
InvestingLearn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
InvestingReviewing investment activity is one of the most important exercises an individual can do to see how efficiently a company's management is using shareholder capital to run is operations.
InvestingA cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.