Alexander Hutton Flashcards
what are the 3 financial statements
income sheet, balance sheet, and statement of cash flows
importance of income sheet
income statements (profit and loss statements) summarize all income and expenses over a given period, including the cumulative impact of revenue, gain, expense, and loss transactions. Income statements are often shared as quarterly and annual reports, showing financial trends and comparisons over time.
what is vertical analysis
method of financial analysis where each line item is listed as a percentage of a base figure within the statement (percentage of gross sales instead of exact dollar amounts)
what is horizontal analysis
reviews and compares changes in the dollar amounts in a company’s financial statements over multiple reporting periods
what is a balance sheet
financial statement of company listing assets, liabilities, and stockholder’s equity of a company during a certain period
importance of balance sheet
shows if company has positive net worth, enough cash/ST assets to cover obligations, “shows what a company owns and owes”
what is a statement of cashflows
shows how cash comes in and leaves a company, highlights cash management and generated revenue of that company, 3 main areas are operating activities, investing activities, and financing activities.
what are operating activities
sources and uses of cash from business activities (profit produced from comp’s goods and services), ex: interest payments, income tax payments, salary & wage payments
what are investing activities
sources and uses of cash from a company’s investments. ex: purchases or sales of assets, loans made to vendors or received from customers, or any payments related to mergers and acquisitions (M&A)
what are financing activities
sources of cash from investors and banks, as well as the way cash is paid to shareholders, uses of cash includes any dividends, payments for stock repurchases, and repayment of debt principal (loans) that are made by the company, Changes in cash from financing are cash-in when capital is raised and cash-out when dividends are paid
