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Question:
Walk me through the three financial statements
Answer:
The three main financial statements are the Income Statement, Balance Sheet, and Cash Flow Statement.
The Income Statement (also known as the Profit and Loss statement) shows the company's revenue and expenses. The bottom line is Net Income.
The Balance Sheet shows the company’s Assets such as their Cash, Inventory, and Property Plants & Equipment (PPE), as well as its Liabilities such as Debt and Accounts Payable. It also shows the company's Shareholders’ Equity. In order to balance the Balance Sheet, Assets must equal Liabilities plus Shareholders’ Equity.
The Cash Flow Statement starts at the top with Net Income, adjusts for non-cash expenses and changes in working capital, and then lists cash flow from both investing and financing activities. At the bottom, the Cash Flow Statement gives the company’s net change in cash.
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