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Comprehensive Income

The sum of a company's net income and other comprehensive income, providing a broader view of changes in equity.

Net Income

The amount remaining after subtracting cost of goods sold, general expenses, taxes, and interest from total revenue.

Income Statement

A financial statement that details a company's revenues and expenses, culminating in net income.

Comprehensive Income

Income that includes unrealized gains and losses, contributing to the overall comprehensive income.

Equity

The value of an ownership interest in a company, which can be affected by comprehensive income.

Investors

Individuals or entities that analyze comprehensive income to assess a company's potential as an investment.

Revenues

The total income generated from sales or services before any expenses are deducted.

Income statement

details revenues and expenses, including taxes and interest

statement of changes in equity

business financial statement that measures the changes in owners' equity throughout a specific accounting period

Retained earnings may be appropriated for the following reasons:

a) Legal requirement

b) Contractual requirement

c) Entity policy

Statement of Retained Earnings

Other term for statement of changes in Equity

3 types of equity

common equity, retained earnings, preferred equity

Common Equity

represents ownership in a company through common stock.

Preferred Equity

preferred stock, which usually provides fixed dividends and has a higher claim on assets than common equity in the event of liquidation.

Retained Earnings

portion of net income that a company retains for reinvestment rather than distributing it as dividends.

cash flow statement

tracks the inflow and outflow of cash, providing insights into a company's financial health and operational efficiency.

two methods of calculating cash flow

direct method and the indirect method.

main components of the cash flow

Operating activities, investing activities, and financing activities

liquidity

creditors determined how much cash is available

OPERATING ACTIVITIES

e any sources and uses of cash from business activities.

INVESTING ACTIVITIES

include any sources and uses of cash from a company’s investments.

operating

Receipts from sales of goods and services •Interest payments •Income tax payments •Payments made to suppliers of goods and services used in production •Salary and wage payments to

investing

Purchases or sales of noncurrent assets,

Loans

any payments related to mergers and acquisitions

FINANCING ACTIVITIES

•includes the sources of cash from investors and banks, as well as the way cash is paid to shareholders.

financing

This includes any dividends, payments for stock repurchase, and repayment of debt principal (loans) that are made by the company. - Changes in cash from financing are cash-in when

HOW TO PREPARE A CASH FLOW STATEMENT

1 . Gather Financial Statements

2. Determine the Reporting Period

3. Choose the Method

4. Prepare the Statement

5. Combine All Sections

6. Reconcile with Beginning Cash

Direct Method

involves listing all cash receipts and payments during the reporting period.

Indirect Method

starts with net income and adjusts for changes in non-cash transactions.

depreciation and amortization

business' net income, but which do not affect the cash flow.