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    How financial statements (IS, BS & CFS) are interrelated

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    Describe how the financial statements (the income statement, statement of retained earnings, balance sheet and statement of cash flows) are interrelated. Provide at least two examples.

    If you were an investor, would you place more emphasis on any one particular financial statement? Explain your answer.

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    Solution Preview

    The income statement and balance sheet are related or connected by retained earnings. The profits from the income statement increased retained earnings so when anything on the income statement changes, so does retained earnings on the balance sheet. The cash flow statement is connected or related to the balance sheet since when cash increases or decreases, it changes the balance sheet (where cash balances are reported) as well as the cash flow statement (where cash inflows and ...

    Solution Summary

    Response is 314 words and a visual aid to show how the financial statements are related with a series of transactions to illustrate. The investor's view is explained.

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