Accounting is the language of business. A knowledgeable person can always get back to the fundamental equation of accounting to make sense of any jumble of numbers making up any of the financial statements of a company: assets=liabilities + owner’s equity.
The assets and liabilities changes came from the balance sheet. The owner’s equity changes were the result of changes in net income.
If a business has a negative gross margin, either costs are out of control, or the pricing structure of the industry does not afford the company a profit. Maybe it’s time to get out of the business.
Cash is king! The inability to manage a company’s cash needs is often the primary cause of the demise of many profitable enterprises. Investors myopically looking at the income statement for a measure of health can be deceived.
Investment activities section reflects the cash effects of transactions in long-term assets on the balance sheet. When a company buys or sells a long-term asset, the cash relating to the transaction is reflected in the investing activities section of the cash flow statement.
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