Simplest way to connect the financial statements
I am looking for a way to connect the financial statements and say the least amount of words. I've been using the example below in my answers. Please let me know what you think of my example and any improvements you might have to offer or maybe even an example of your own.
1) Income statement flows to net income 2) Cash flow statement is started w/ net income 3) Cash flow consist of beginning and ending cash balance 4) Ending cash balance flows to balance sheet
Net Income flows into cash flow as net income
Ending cash balance flows into balance sheet as cash and cash equivalents
Retained earnings flows into i/s as net income (assuming the firm doesn't pay dividends)
Actually net change in cash from cash flow statement added to the beginning cash on the balance sheet and becomes final cash. Net income (assuming the firm doesnt pay dividends) goes to retained earnings which flow to shareholders equity on the balance sheet.
that's right - should be the other way around
don't know what I was thinking earlier.
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