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Financial Statement Articulation

Articulation Overview

  • Articulation = linkage among financial statements that forms one coherent financial story
  • Ensures financial performance (over the period) connects to financial position (end of period)

Key Statement Relationships

  • Income Statement ➔ provides Net Income
  • Statement of Cash Flows ➔ details sources/uses of cash; ending cash ties to Cash on Balance Sheet
  • Balance Sheet ➔ captures ending balances of Assets, Liabilities, Equity; these are influenced by the other statements

Role of Statement of Retained Earnings

  • Bridges Income Statement & Balance Sheet
  • Shows how profits are retained or distributed
  • Fundamental equation:
    \text{Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} - \text{Dividends}

Takeaways

  • No statement stands alone; each feeds figures to the others
  • Articulation provides a full, cohesive view of performance (period) and position (point-in-time)