Understanding the Fundamentals

a. The balance sheet displays assets (tangible or intangible items of value owned by a business) and liabilities (accounts payable, rent or mortgages, and general expenses), along with owner/shareholder equity (assets minus liabilities), at a certain point in time.

b. The income statement shows the performance of a business over a specific period by displaying total revenue at the top, total expenses in the middle, and total net income at the bottom.

c. The cash flow statement describes how money enters the firm and how it is allocated over a set period, typically a month.