Set2Success - CMA USA

Interconnection Between Financial Statements 💡

Understanding how the Income Statement, Balance Sheet, and Cash Flow Statement are interconnected is crucial for financial analysis. These three statements provide a complete picture of a company's financial health and performance.

🔹 Key Takeaways:
✅ Net Income from the Income Statement flows into Retained Earnings on the Balance Sheet and is also the starting point for Operating Cash Flow.
✅ Depreciation & Amortization reduce Net Income but are added back in the Cash Flow Statement as non-cash expenses.
✅ Changes in Working Capital affect both the Balance Sheet and Cash Flow Statement.
✅ Dividends & Debt Transactions impact both Shareholders' Equity and Cash Flow.

A strong grasp of these connections helps in financial decision-making, investment analysis, and corporate strategy! 🚀

Balance Sheet
A balance sheet provides a snapshot of what a company owns (assets) and what it owes (liabilities), revealing its financial position. The elements of a balance sheet are Assets, Liabilities, and Equity.

Assets
Shows everything the company OWNS.
Two categories of Assets:
Current Assets: Assets that can be converted to cash or used within a year.
Example: Cash, cash equivalents, accounts receivable, stock inventory, marketable securities.
Long-term Assets: Resources that a company uses for more than a year to generate income.
Example: Fixed assets like property, plant, equipment, land, machinery, buildings, fixtures, and vehicles.

Liabilities
Shows everything the company OWES.
Two categories of Liabilities:
Current Liabilities: Obligations due in less than 1 year.
Long-term Liabilities: Obligations due in more than 1 year.

Shareholder’s Equity
A company’s Net Worth.
Formula:
Shareholder’s Equity = Assets - Liabilities

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Question Bank

The Set2Success Question Bank, tailored for CMA Part 1 and Part 2, offers a robust collection of practice questions. This resource is designed to assist individuals in their journey toward becoming a Certified Management Accountant (CMA).

https://www.set2success.net/QuestionBank

CMA Exam Prep Packages from Set2Success! We recognize every CMA candidate is unique. That's why Set2Success offers tailored exam prep packages. Whether you prefer mobile-friendly videos or in-depth ...

Start your CMA USA journey with our Free Mock Test! 🎯

Practice Part 1: Financial Planning, Performance, and Analytics & Practice Part 2: Strategic Financial Management

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