Reading Balance Sheets
Financial document provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time
What is a balance sheet?
This financial statement provides a summary of a company's revenues, expenses, and net income over a specific period
What is an income statement?
This financial statement shows how changes in balance sheet accounts and income affect cash and cash equivalents
What is a cash flow statement?
The ending cash balance on the cash flow statement and the cash account on the balance sheet are related in this way
What is they should match or be the same amount?
This is how might a company use information from its balance sheet to make operational decisions
What is managing working capital, such as adjusting inventory levels or delaying payments to suppliers?
On a balance sheet, the side which represents a company's assets
What is the left side (or the "debit" side)?
In an income statement, this is the difference between gross profit and net income
What are total revenues minus cost of goods sold for gross profit and gross profit minus operating expenses for net income?
The three main sections of a cash flow statement
What are operating activities, investing activities, and financing activities?
This financial statement provides information on a company's profitability for a specific period, while the balance sheet provides a snapshot of financial position
What is the income statement?
These operational decisions can be informed by the income statement, especially in terms of cost control
What is reducing unnecessary expenses or optimizing pricing strategies?
How you calculate shareholders' equity on a balance sheet
What is assets minus liabilities?
The section of the income statement includes expenses directly related to the production of goods or services
What is the cost of goods sold (COGS)?
In a cash flow statement, this section is where you find information about cash received from customers and cash paid to suppliers
What is the operating activities section?
If a company reports a large depreciation expense on the income statement, it affects cash flow in this way
What is it reduces net income on the income statement but doesn't impact cash flow?
This can provide insights from the cash flow statement help a company improve its operations
What is managing cash flow to ensure liquidity for day-to-day operations or expansion opportunities?
When a company's assets exceed its liabilities, this term describes the positive difference
What is shareholders' equity or net assets?
A negative net income on an income statement indicates this
What is a loss for the specified period?
If a company borrows money, this section of the cash flow statement will reflect this activity
What is the financing activities section?
This financial statement would you look at to determine a company's ability to pay its short-term debts
What is the balance sheet, specifically the current assets and current liabilities sections?
A decrease in the cash balance on the balance sheet implies this for a company's operations
What is that the company may be using cash for investments, debt repayments, or other expenses?
A higher accounts payable figure on a balance sheet indicates this
What is an increase in the company's short-term debts or obligations?
On an income statement, this area is where are taxes usually accounted for
What is "income tax expense"?
A positive cash flow from operating activities indicates this
What is a company generated more cash from its core operations than it spent?
This is how you calculate the free cash flow of a company using information from the income statement and cash flow statement
What is operating cash flow minus capital expenditures?
An increase in retained earnings on the balance sheet impact a company's financial flexibility in this way
What is that it indicates the company has retained profits, potentially providing more resources for future investments or operations?