3 Financial Statements

What does the balance sheet show

snapshot of business’s assets, liabilities, equity at single part of time

what should assets equal to

liabilities + equity

What does equity mean

Owner's stake in company (company’s net worth)

What does an income statement show

summarize business revenues + expenses over period of time

What does assets mean

What the company owns

why does profit not equal to cash flow (why businesses need cash flow statement)

• Time of payment (e.g. give 30 day window to pay)

• Depreciation (e.g. Cars, paid sales price, but profit decrease each year)

• inventory & capital spending (e.g. spend 20K to stock warehouse in products: profit no change, cash immediately out)

What does the cash flow statement show

cash inflows + outflows over period of time

What are the 2 methods of accounting and their attributes

cash method & accrual method

What’s the order in which the 3 financial statements should be read in an interview

Income → cash flow→ Balance sheet

what does retained earnings mean

company's cumulative profit that it keeps (retains) rather than paying out to shareholders as dividends

• “savings account” for reinvestment

What does goodwill mean

intangible asset (company’s brand, customer loyalty, '“secrets”)