Walk me through the 3 financial statements.

The income statement shows how profitable or unprofitable your business is. It typically contains revenue, COGS, SG&A, which gets you down to EBITDA, and then contains depreciation and amortization, interest, and tax, which gets you down to net income.

The cash flow statement shows the cash coming in and out of your business, how much cash you gained or lost in total, which gets you to your current cash position. Typically, this is done by starting with net income, and then adding back all the non-cash items in the income statement as well as net working capital. Afterwards, any other cash flow numbers not included in the income statement are also added in.

Below are the three sections of the cash flow statement; this is not necessary for your verbal answer, but they’re displayed here for clarity.

• Cash flow from operations: starting for net income, we then account for changes in net working capital, and we also add all non-cash items in the income statement such as depreciation and amortization

• Cash flow from investing: includes any cash outflow which results in the purchase of an asset, such as capital expenditures (capex) and business acquisitions

• Cash flow from financing: includes any cash flows raised from issuance of debt or equity, as well as any debt repayments or dividends

Finally, the balance sheet displays the assets (e.g. cash, accounts receivable, property plant and equipment) on one side, and liabilities (e.g. accounts payable, debt) and shareholder’s equity on the other side. Since the assets must be either funded by liabilities or equity, assets = liabilities + shareholder’s equity.