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Stocks 107: Introduction to Financial Statements

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1.
On the income statement, profits tell you _______.
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The difference between how much a company brought in and how much it spent during a given period. A companys profits are the difference between how much it brought in (its revenues) and how much it spent (its expenses) during a given period.
2.
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.
3.
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.
4.
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.
5.
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).