- Let's talk a little about financial statements.
These reports provide some of the raw data
people use in making financial decisions.
- [Man In Blue] The first primary financial
statement is the balance sheet.
A balance sheet is a list of a company's
valuable resources, it's assets.
- A balance sheet also shows the three general
sources that companies use to get money to buy assets.
First, they can borrow.
Second, the owners can take money
from their private savings and invest it in the business.
And third, the company can generate profits
that are then kept in the business
to buy more assets.
- [Man In Blue] The second primary financial
statement is the income statement.
An income statement is a report telling
how much money a company made during the month,
or the quarter, or the year,
whatever period is covered by the income statement.
- It seems like people are always talking
about companies' income statements.
- Yeah, you often hear in the business news
about a company's net income.
- [Man In Pink] Now the third primary financial
statement is the statement of cash flows.
- [Man In Blue] So let me give you a lesson
in accounting terminology.
When in doubt, say it slowly.
So what is a statement of cash flows?
It's a statement of a company's cash flows.
- So, just a report of cash in, cash out.
- That's pretty much it.
- [Man In Pink] Okay, so there are three
financial statements, the balance sheet,
the income statement, and the statement of cash flows.
- But those financial statements
don't just create themselves.
They are a culmination, the pinnacle,
the capstone of the bookkeeping process.
- So, before we get into the details of bookkeeping,
let's get an idea of where we're going.
Let's look at the end result, the financial statements.
- Now, back to those three primary financial statements,
which one is your favorite?
- Oh man, that's a tough question.
We'll have to think about that.