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Building the Three Statements

Build a real company's income statement, balance sheet, and cash flow statement from an empty grid, three years running left to right: revenue down to net income, the balance sheet's new balances, the cash flow statement that bridges accounting profit to actual cash, and Cash itself linked back into the balance sheet rather than typed in. Build each line's formula once in Year 1, drag it across Year 2 and Year 3, and get the roll-forwards right. No deal, no LBO, just the mechanics every corporate finance and investments class starts with. Finishes on the balance check.

CF · Foundations · about 100 minutes · 34 guided steps

Lesson outline

Income Statement

  1. Step 1: Revenue
  2. Step 2: Cost of Goods Sold (COGS)
  3. Step 3: Gross Profit
  4. Step 4: SG&A
  5. Step 5: EBIT (Operating Income)
  6. Step 6: Interest Expense
  7. Step 7: Pre-Tax Income (EBT)
  8. Step 8: Taxes
  9. Step 9: Net Income

Balance Sheet: New Balances

  1. Step 10: Depreciation & Amortization
  2. Step 11: CapEx
  3. Step 12: Accounts Receivable
  4. Step 13: Inventory
  5. Step 14: PP&E, net
  6. Step 15: Accounts Payable
  7. Step 16: Debt
  8. Step 17: Common Stock
  9. Step 18: Retained Earnings

Cash Flow Statement

  1. Step 19: Cash Flow: Net Income
  2. Step 20: + Depreciation & Amortization
  3. Step 21: (Increase) in Accounts Receivable
  4. Step 22: (Increase) in Inventory
  5. Step 23: Increase in Accounts Payable
  6. Step 24: Cash Flow from Operations
  7. Step 25: Cash Flow from Investing
  8. Step 26: Cash Flow from Financing
  9. Step 27: Net Change in Cash
  10. Step 28: Ending Cash

Completing the Balance Sheet

  1. Step 29: Cash
  2. Step 30: Total Assets
  3. Step 31: Total Liabilities
  4. Step 32: Total Equity
  5. Step 33: Total Liabilities & Equity

Balance Check

  1. Step 34: Balance Check