Financial Statements

Question 1

Three questions to answer about any business:

Answer 1

1) How much equity?
2) How much profit?
3) Where did cash come from and where did it go?

Question 2

What statement answers the question: what is the equity in the business?

Answer 2

The Balance Sheet

Question 3

What statement is the AE in financial statement form? What does it show?

Answer 3

Balance Sheet
It shows the assets, then liabilities, then equity - each with their separate totals

Question 4

What are two other names for the Balance Sheet?

Answer 4

1) Statement of Financial Position
2) Statement of Financial Condition

Question 5

What statement feeds onto the Balance Sheet which causes it to balance?

Answer 5

Income Statement

Question 6

What statement answers the question: What was the net income/profit for a given time period of the business?

Answer 6

Income Statement

Question 7

What four things does the Income Statement summarize for a specified period of time?

Answer 7

1) Revenue
2) Costs
3) Expenses
4) Net Income (or loss)

Question 8

What is the Net Income equation?

Answer 8

Net Income = Revenue - expenses - costs

Question 9

To what financial statement do you transfer the Net Income derived from the Income Statement?

Answer 9

Balance Sheet

Question 10

What happens to the Income Statement at the end of its specified time period?

Answer 10

It gets closed out (like a year-to-date pay stub)

Question 11

What statement answers the question: Where did my cash come from and where did it go?

Answer 11

Statement of Cash Flows

Question 12

What statement is often not shown to clients but can really help them?

Answer 12

Statement of Cash Flows

Question 13

What three categories/activities does the Statement of Cash Flows cover?

Answer 13

1) Operating activities (day-to-day operations)
2) Investing activities (e.g. equipment)
3) Financing activities (loans for #2)