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financial statements

1. What is the interrelationship between the four financial statements?

2. Why is it important to make comparisons using ratio analysis? What are the different ways you can make comparisons?

3. Is it possible for a company to have a profit and a negative cash flow? Explain your answer.

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1. What is the interrelationship between the four financial statements?

The four basic financial statements, ie, Balance Sheet, Income Statement, Cash Flow Statement and the Statement of Stockholder's equity are highly interrelated to each other because many of the values that are reflected in one statement generally find themselves in another. Even more so, there is a flow of information from one financial statement to another. For example, The net income (or loss) from the Income Statement is brought forward to the Balance Sheet. Similarly, To obtain the year end equity position, net income is added or net loss is subtracted from the equity position at the beginning of the year.

Thus, we see ...

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Interrelationship between the four financial statements

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