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Financial statements
How the three statements link
Net income flows to retained earnings on the balance sheet and is the first line of the cash flow statement; the change in cash on the cash flow statement is the change in cash on the balance sheet; depreciation reduces income and fixed assets and is added back to cash.
Owned by: Senior analystTest band: Senior analyst
In practice
A three-statement model is only right when the balance sheet balances by construction, not by a plug. If it does not, the cash flow statement is missing a balance-sheet change.
The kind of thing the test asks
- Depreciation of $10k appears where?