Connecting the Income Statement, Balance Sheet, and Cash Flow Statement

Are you also practising how to speak in slow motion?

Great and precise explanation

SPEAK FASTER ..TOO BLOODY SLOW 😂😂😂

1.25 speed is better on this very very quality but a bit slow thanks for the good content on this video man much help

*Title:* "Understanding the Connection Between Financial Statements"

*Summary:*
In this video, the presenter explains how the income statement, balance sheet, and cash flow statement are interconnected and collectively reflect a business's financial position. The video provides a clear example using "Tim's Cars" to illustrate the relationships between these financial statements. Here are the key points and main takeaways from the video:

1. *Financial Statement Overview:* The income statement, balance sheet, and cash flow statement are essential financial documents that collectively portray a company's financial status.

2. *Income Statement:* The income statement shows a business's profitability. It records revenue, subtracts the cost of goods sold, operating expenses, and taxes to arrive at the net income or profit.

3. *Cash Flow Statement:* The cash flow statement reveals how much actual cash a business generates, invests, and raises. It begins with the net income from the income statement.

4. *Non-Cash Charges:* Non-cash charges, like depreciation and amortization, are added back to the net income to represent actual cash flow.

5. *Changes in Working Capital:* Changes in current assets (e.g., accounts receivable and inventory) and current liabilities (e.g., accounts payable) are factored in to determine the operating cash flow.

6. *Investing Cash Flow:* The investing cash flow section accounts for expenditures on property, plant, and equipment (capital expenditures). It reflects how a company invests in its assets.

7. *Financing Cash Flow:* The financing cash flow section includes activities related to raising capital, such as issuing stock or taking on debt. It shows how a company finances its operations.

8. *Balance Sheet:* The balance sheet outlines a company's assets, liabilities, and owner's equity. It reflects the company's financial position at a specific point in time.

9. *Owner's Equity Calculation:* Owner's equity is calculated as assets minus liabilities. It represents the value that stockholders would be entitled to if the company were to go bankrupt.

10. *Interconnected Financial Statements:* The three financial statements (income statement, balance sheet, and cash flow statement) are interrelated, and changes in one statement affect the others. Together, they provide a comprehensive view of a company's financial health.

11. *Complexity Varies:* While the example uses a simplified scenario, the principles apply to more complex businesses, including those in the stock market.

Understanding how these financial statements are connected is crucial for investors looking to make informed investment decisions.

If you write off $14.000 as D&A and spend $9.000 on investment, your non-current assets will decrease by $5000 and not increase as in the example by $4.500.

Superb summery explanations. Bravo. You should teach at harvard!

Why is the PPE increase only 4500? Is this not related to the 9000 spent on PPE in the cash flow statement?

Why is the accounts payable increased by $2000?

I found this confusing

You okay bro?

Can you explain how on the cash flow statement the company spent $9,000 on PP&E but on the Balance Sheet it increased by $4,500 only? Is it cause out of the $9,000, $4,500 was used to REPLACE current equipment?

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Great Video! I am trying to understand that before any corporation begins its activities (any industry; from software to manufacturing), considering that its creditors will be paid after X days, and its debtors will pay in Y days, How does the firm ascertain how much finance/cash is needed on a monthly basis to actually run the business? Since Cash inflows and Outflows will not be immediate, how does it ensure that it has sufficient funds available to run the business?

Had to stop. Speaking far too slow

Great explanation. Thank you for making it!

I'm confused how investing cash flow has a $9000 outflow but PP&E only increases by 4500. Shouldn't these values match up?

Replacing old equipment should increase PPE as well, since non-current assets are usually net of depreciation.

You should upload more videos ...these are very helpful

This was the thorughest and simplest way of understanding I was looking for ...thanks❤️

great, thanks

Great explanation of how the balance sheet, income statement, and cash flow all integrate

Need more visual Indicators on the figures while referring to a specific figure, without that it will be hard to follow the figures.

Oh

Keep up this great work! Well explained.

had to play this video at 1.5x speed

How did u get the operating cash flow $11.000?

Hi, please advise why the Cost of Goods Sold COGS (Income Statement) included "Depreciation & Amortization" item? Is this the depreciation of the car sold or depreciation of equipment used to run the business? Shouldn't this be an item under operating expense? Thank you.

Play at 1.25x. You’re welcome.

This is what I have been try to find ! Linking them all together! Can you make videos for all stock terminology ROIC, PS….

Superb.....

This was such an awesome video and it helped clearly explain to my students how the balance sheet, cash flow statement, and income statement are connected! My recommendation would be that the video sound is a bit monotonous so some of the kids zoned out a bit, but besides that it was great!

You made it easy, Thanks bro ❤️

There are professors out there that need to learn from you. Question though, why does the increase in current assets result in a negative transaction in the Cash Flow statement? There value went up, so wouldn't that mean cash value goes up as well?

@7.23,,, this property plant and equip of $4500 explanation doesn't make sense you say they spent $4500, but it shows ($9000) on the CFS?...

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WHAT A GUY <3

Very good work, but FCF part is missing. I want to Understand how is FCF connected ,
How ROCE - COC (Return on Capital Employed - Cost of Capital ) translates to FCF ?? If you couldn explain it would be a big help, Thanks And keep up good work 👍🙏

Thank you, this lesson is very valuable!

Awesome videos!! Your channel needs more subs!!!

I've a question, base on Tim's cars Financials, would you invest in the company? and why?
I kinda understood the connection between the 3 sections, but how do we assess if the company is an investable asset base on it?

Thank you in advance!!

very beautifully explained.
thanks

Very effective visuals and explanation. I have to do financial.statements for the bank to open a business account. Very useful! Thank u for sharing!