Equation: Assets= Owner's Equity+ liabilities


Provides a snapshot of a company's balance between its assents, liabilities and owners' equity at a specific point in time

Cash flow statement

-Records a company's cash inflows and cash outflows over a defined period of time

- Usually derived from the income statement and balance sheet

-Shows where the company's cash originated, how the company used its cash and if the company has enough cash to return its loans and continue to operate


Operating cash flow

- Includes cash generated by and required for the daily operations of a business.

- Ex: Cash received from the same of products, payment to suppliers, salaries, rent

- Two methods for calculating it, Indirect and Direct.

-Direct- Adjusting each item on the income statement from an accrual basis to a cash basis

-Indirect-Adding and subtracting non cash revenue and expenses from net income.

Investing Cash Flow

-Includes cash used for investing in long term assets and cash received from the sale of such investments

-Examples- purchase of property, sale of debt, purchase of equipment

Financing Cash Flow

-Includes cash paid to or received from external sources such as lenders, investors and share holders.

-Examples: Dividends paid, issuance of bonds, issuance of stock and bank loans