Analysis Beginner: Introduction to Financial Statements

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1.
The three elements of an income statement are _______.
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Revenues, expenses, and profit. The income statement tells you how much money a company has brought in (its revenues), how much it has spent (its expenses), and the difference between the two (its profit).
2.
What is a major difference between the income statement and the statement of cash flows?
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The statement of cash flows excludes noncash revenues and expenses. The statement of cash flows excludes noncash revenues and expenses, showing actual cash flows. Both the income statement and statement of cash flows show results for a period of time like a quarter or a year, and the income statement--not the statement of cash flows--provides a breakdown of revenues, expenses, and profits.
3.
Which of the following is not part of the statement of cash flows?
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Cash flows from expense activities. The statement of cash flows has three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.
4.
Current assets are _______.
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Assets likely to be used up or converted into cash within the next year. Current assets are likely to be used up or converted into cash within one business cycle, usually defined as one year.
5.
A company with lots of assets relative to liabilities on its balance sheet _______.
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Is healthier than a company with lots of liabilities. A company with lots of assets relative to liabilities would have relatively high equity (Assets - Liabilities = Equity) and less risk of going bankrupt. Generally speaking, companies with lots of assets relative to liabilities are healthier and more resistant to setbacks than companies with lots of liabilities.