I. Introduction

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

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