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.
A companys income statement shows you its revenues and expenses _______.
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Over a specific time frame. The income statement shows a companys revenues and expenses over a specific time frame such as three months or a year.
3.
The statement of cash flows tells you what?
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How much cash went into and out of a company during a specific time period. The cash flow statement is similar to the income statement, but due to accrual accounting, it covers only actual cash.
4.
The three elements of a balance sheet are _______.
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Assets, liabilities, and shareholder equity. The balance sheet tells you how much a company owns (its assets) and how much it owes (its liabilities). The difference between what it owns and what it owes is its equity.
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.