- Let's talk a little about financial statements.
These reports provide some of the raw data
people use in making financial decisions.
- [Male] Now the first primary financial statement
is the balance sheet.
A balance sheet is a listing 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 it.
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.
- [Male] Now the second primary financial statement
is the income statement.
An income statement is a report telling how much money
a company made during a month, or the quarter,
or the year, whatever period is covered by income statement.
- It seems like people are always talking
about companies income statements.
- Yes, you often hear in the business news
about a company's net income.
The third primary financial statement
is the statement of cash flows.
- Now 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.
- That seems easy so just a report of cash in, cash out.
- Yep that's pretty much it.
- So the three primary financial statements
are the balance sheet, the income statement,
and the statement of cash flows.
- That's perfect.
- So what's your favorite one?
- Ooh, now that's a tough question.
I'm going to have to think about that.