Income Statement
This is the "bottom line" profit after all expenses and taxes.
What is Net Income?
The fundamental accounting equation that balances it all...
What is assets = liabilities + equity?
This section of the Cash Flow Statement starts with Net Income and adds back non-cash items.
What is Cash Flow from Operations (CFO)?
This from the Income Statement flows into Retained Earnings on the BS and starts the Cash Flow Statement.
What is Net Income?
This popular metric adds back D&A, interest, and taxes to show operating performance.
What is EBITDA?
This section on the BS accumulates profits minus dividends over time.
What are Retained Earnings?
Negative here is often good if it represents growth investments.
What is Cash Flow from Investing (or CapEx)?
This non-cash expense is added back in Cash Flow but reduces an asset on the BS.
What is Depreciation (or D&A)?
In small businesses, these are often added back during normalization because the owner pays themselves excessively.
What is Owner's compensation (or personal/perks expenses)?
These are short-term assets minus short-term liabilities; big swings affect cash.
What is Working Capital (or Net Working Capital)?
This section of the cash flow statement shows how the business is funded from external sources.
What is the cash flow from financing section?
If depreciation increases by $10 (assume 25% tax), Net Income falls by this amount.
What is $7.50?
This is the accounting method taught in school where revenue is recognized when earned and expenses when incurred — regardless of when cash actually changes hands.
What is accrual accounting?
This non-current asset decreases over time due to depreciation.
What is PP&E (Property, Plant & Equipment)?
Changes in AR, Inventory, and AP are adjusted here.
What are Changes in Working Capital?
CapEx increases PP&E on the BS and appears as a cash outflow here.
What is Cash Flow from Investing?
Adjusted EBITDA is usually (pick one: higher or lower) than SDE because _________ has been (pick one: added or subtracted) from SDE
What is lower, new owner/operator's salary, subtracted?
A good proxy for Maintenance CapEx is usually _____.
What is depreciation?
"Cash is king" — a company can have this but still run out of cash.
What is positive Net Income (or accounting profit)?
The ending number here must exactly match the Cash line on the Balance Sheet.
What is Ending Cash (on the Cash Flow Statement)?