Your question is Link the Three Financial Statements. Take a moment with it on the right.
Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).
You are reviewing a newly filed annual report for a mid-sized public data and analytics company in FactSet Workstation, and your manager wants to know whether you can move beyond definitions and explain how the statements connect. The company reported positive net income, but cash from operations was lower because working capital moved against it, and capex also affected the year-end cash balance. Assume U.S. GAAP and use the simplified figures below from the latest fiscal year.
| Metric | Amount |
|---|---|
| Revenue | $500,000,000 |
| Operating expenses excluding depreciation | $420,000,000 |
| Depreciation expense | $20,000,000 |
| Interest expense | $5,000,000 |
| Tax expense | $11,000,000 |
| Increase in accounts receivable | $12,000,000 |
| Increase in accounts payable | $7,000,000 |
| Capital expenditures | $25,000,000 |
| Beginning cash balance | $40,000,000 |
What do the income statement, balance sheet, and cash flow statement each represent, and how would you use these figures to show how they link together into ending cash? As you answer, quantify the headline outputs and explain what the numbers imply about earnings versus cash generation.