Income Statement, Balance Sheet, and Cash Flow

Financial Statement dates reference a precise period and correspond to one or a collection of transactions for that date or up to that date specified. Without dates on financial statements, entities would not be able to calculate or assess a business’ historical or upcoming performance.

The Primary Financial Statements Tie Together (Consolidated Financial Statements)

The income statements’ revenue and expense illustrate the changes in assets and liabilities on the balance sheet. Cash assets and cash and cash equivalents on a balance sheet are reflected on the statements of cash flows. Also, the statements of cash flows present additional data on cash assets displayed on the balance sheet.

Managerial assessments you can make about a company that has a profit and a negative cash flow in the same accounting period.

The following assessments may be different for every scenario and are merely speculation on what “profit and negative cash flow” would imply within the same accounting period:

1. Although the company may display profits, the company is not profitable enough to replenish cash flow. (This is why dates are important. A company’s operations could be forecasted from previous accounting periods and contracts, and could greatly affect cash flow).

2. The distribution of cash surplus for operational costs is greater than profits received.

3. The company is expanding or invested in a new business model awaiting profits for positive cash flow.

4. The company is a debtor to creditors who have provided working capital.

5. The cash flow is unavailable; however debtors remain to pay their debt, providing profit for the company.

6. The company may need new managers to manage working capital.