Chapter 2 Discussion Question
Mora Stanley is an aspiring entrepreneur and your
friend. She is having difficulty understanding the purposes of financial statements and how they fit together across time.
Required Write a one-page memorandum to Stanley explaining the purposes of the four financial statements and how they are linked across time.
the four financial statements are: (1) balance sheets; (2)income statements (3) cash flow statements (4) statement of shareholders' equity. Balance sheets show what a company owns and what it owes at a fixed point in time. income statements show how much money a company made and spent over a period of time.
Net income links to both the balance sheet and cash flow statement. In terms of the balance sheet, net income flows into stockholder's equity via retained earnings. ... In terms of the cash flow statement, net income is the first line as it is used to calculate cash flows from operations.
