Connecting the Income Statement, Balance Sheet, and Cash Flow Statement
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- Опубліковано 2 лип 2024
- Every public company in the US has Three Financial Statements. Investors can link these financial statements to better make sense of the financial position of a business. This video explains how the Three Financial Statements connect (link).
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Major Sections:
1. Income Statement
2. Profit/Loss
3. Cash Flow Statement
4. Depreciation/Amortization
5. Changes in Working Capital
6. Balance Sheet
PS I apologize for the nasally sound, I had Covid while recording this.
PLEASE LEAVE A LIKE AND SUBSCRIBE IF YOU ENJOYED!
You do a better job explaining this in 7 minutes on 2x speed than four tenured professors teaching it for weeks lmao
This was the thorughest and simplest way of understanding I was looking for ...thanks❤️
Great explanation of how the balance sheet, income statement, and cash flow all integrate
Great explanation. Thank you for making it!
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You made it easy, Thanks bro ❤️
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!
Wow first time I understood exactly what was going on, reading through financial statements is very boring but this was well explained and fast.
Great and precise explanation
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!
So glad to help! Good luck with your venture!
Thank you, this lesson is very valuable!
Thanks so much!
This is a good explanation👏👏👏
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Great explanation
Awesome video
You should upload more videos ...these are very helpful
very beautifully explained.
thanks
Happy to help! Thank you :)
THANKYOUUUU SO MUCHHH BECAUSE OF YOUR VID I CAN ANSWER MY TASK OMG!! hehehe thankyouuu againnn
Fantastic! Happy to help :)
WHAT A GUY
Superb summery explanations. Bravo. You should teach at harvard!
This is what I have been try to find ! Linking them all together! Can you make videos for all stock terminology ROIC, PS….
Replacing old equipment should increase PPE as well, since non-current assets are usually net of depreciation.
great, thanks
Superb.....
Keep up this great work! Well explained.
Need more visual Indicators on the figures while referring to a specific figure, without that it will be hard to follow the figures.
**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.
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?
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
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!!
That’s a great question and unfortunately valuation is a huge topic that will take more than just a comment to do it justice. I’ll be sure to make some videos on valuation!
Subscribed
I'm a company secratery student in india it helped me a lot
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 👍🙏
FCF is just the operating cash flow subtracted by the capital expenditures (or maintenance capital expenditures). ROCE is just the operating cash flow divided by the total assets - current liabilities and represents a percentage. It does not have a direct correlation to the FCF as it deals with return on assets and FCF is a profit-like figure.
I'm confused how investing cash flow has a $9000 outflow but PP&E only increases by 4500. Shouldn't these values match up?
This is great, thank you. Please use a mic pop filter :)
Wouldn't the non-current assets be subject to depreciation? Here it appears they are valued at their original acquisition cost, in the past.
Why is the PPE increase only 4500? Is this not related to the 9000 spent on PPE in the cash flow statement?
How did u get the operating cash flow $11.000?
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?
I was confused by this also, if anyone could give insight it would be greatly appreciate
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.
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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?
Good question, if you figure out a way to the perfect number, you’ll become very rich. Basically you just want to have ‘enough’ money. You can try to do projections, scenarios, and models from other companies but at the end of the day it’s like everything in finance, a guessing game (with educated guesses). It is highly dependent on industry as well; volatility by sector is usually what kills cash flow (and thus businesses).
@@BullInvestor Honestly I am not looking for the perfect number, just want to know what the methodology is called, so that I can study it further. I've just been told it's called Capital Financing and/or Working Capital Financing, so let's see where it takes me. Tks,
I have heard of those spaces but I’m honestly not too familiar with them. They do seem like a good shot to figure out what you’re looking for, best of luck!
why is depreciation positive on cf statement?
5:58 a/r a/p
Hi! It’s a non-cash expense, so it has to be added back. Depreciation is just for tax purposes, the actual amount invested by the business can be found in the “investing activities”. Hope this helps!
Why is the accounts payable increased by $2000?
why ppe +4,5 when capex is 9?
Oh
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.
had to play this video at 1.5x speed
I don’t get why PPE became 9000 with 4500 increase
Play at 1.25x. You’re welcome.
@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?...
As stated in the video, $4500 was spent on maintaining existing assets and $4500 was spent on new assets
@@BullInvestor ok thanks !!
No problem!
You okay bro?
I found this confusing
my lecturer spend 20 minutes on excel to teach us how to fill in a cashflow statement. wasn't very effective
Are you also practising how to speak in slow motion?
SPEAK FASTER ..TOO BLOODY SLOW 😂😂😂
😂😂
Had to stop. Speaking far too slow
@@dyyddson don't troll. Or you'll get a strike
If only there were a button for that
@@BullInvestor I know there's fast forward. But my moan was targeted at the channel. They should bear in mind that speaking at a really slow rate is going to bounce a lot of viewers, who haven't got time or patience.
It's same as the extremely quiet videos, that once ended, blow your ears off ad adverts max volume.
That may be true for channels with a native English speaking audience majority, but the opposite is true for this channel. When speaking faster, bounce rates are higher for me.
@@BullInvestor I guess some of the info needs to be at a pace so most can see what's going on. I'm biased, as people in London speak a hundred miles an hour and everything should have been done yesterday