Financial statement analysis

Balance sheet walk demonstrates financial statement analysis using the relationship of the key financial statements, the income statement, cash flow and balance sheet.


We show the financial statement links

Most business people tend to look at each of the financial statements in turn. Our contribution is to show that all three key financial statements are linked.

The income statement shows the potential cash flows. The cash flow statement shows the real cash flows. The balance sheet shows the cash owing or payable.


Income statement

The income statement (or profit and loss) shows revenue, cost of sales, expenses, interest and tax, but does not show the cash flow for a business.


Balance sheet

The balance sheet shows the assets and liabilities for the business. On the balance sheet we can see the cash balance at the start and end of the period. However, the details of all the cash flows cannot be gleaned from the balance sheet.


Cash flow

The cash flow statement shows the cash flows for the business. Here we see the operating cash flows, financing cash flows and investing cash flows.


The financial statements are linked

The income statement, cash flow and balance sheet above are not independent of each other. Understanding this helps with financial statement analysis. For a demonstration of how the financial statements work together seeĀ Financial statements links.


"The financial statements are linked!"