When we look at a business’s finances, there are three important documents we need to know about: the Balance Sheet, the Income Statement, and the Cash Flow Statement. These documents work together to give us a full picture of how a company is doing financially.
Let’s start with the Balance Sheet.
The key idea here is:
Next, we have the Income Statement.
The net income from the Income Statement connects to the Balance Sheet. If the company makes a profit, that amount adds to the equity. If the company loses money, the equity goes down.
Now, let’s talk about the Cash Flow Statement.
This statement is very important because it shows how well the company manages its cash. Good cash management is key for paying bills and helping the business grow.
The Cash Flow Statement affects the Balance Sheet directly. For example, cash generated from operating activities increases the current assets on the Balance Sheet. This increase in cash is important for covering short-term bills.
Additionally, the Cash Flow Statement starts with the net income from the Income Statement. This shows how net income becomes actual cash, giving us insight into how the company runs and manages its money.
In summary, these three financial statements work together to tell the story of a company's financial health.
Together, they help everyone involved in the company understand its financial situation better and make smarter decisions.
When we look at a business’s finances, there are three important documents we need to know about: the Balance Sheet, the Income Statement, and the Cash Flow Statement. These documents work together to give us a full picture of how a company is doing financially.
Let’s start with the Balance Sheet.
The key idea here is:
Next, we have the Income Statement.
The net income from the Income Statement connects to the Balance Sheet. If the company makes a profit, that amount adds to the equity. If the company loses money, the equity goes down.
Now, let’s talk about the Cash Flow Statement.
This statement is very important because it shows how well the company manages its cash. Good cash management is key for paying bills and helping the business grow.
The Cash Flow Statement affects the Balance Sheet directly. For example, cash generated from operating activities increases the current assets on the Balance Sheet. This increase in cash is important for covering short-term bills.
Additionally, the Cash Flow Statement starts with the net income from the Income Statement. This shows how net income becomes actual cash, giving us insight into how the company runs and manages its money.
In summary, these three financial statements work together to tell the story of a company's financial health.
Together, they help everyone involved in the company understand its financial situation better and make smarter decisions.