Can you give examples of major line items on each of the financial statements?
Answer
See below, I’m sorry in advance. We’ve added links to definitions of some the items if you want a quick refresh:
- Income Statement
- Revenue
- COGS
- G&A
- S&M
- R&D
- Operating Income
- Pretax Income
- Net Income
- Balance Sheet
- Cash
- Accounts Receivable
- Inventory
- Accrued Compensation
- PP&E
- Accounts Payable
- Accrued Expenses
- Debt
- Shareholder’s Equity
- Cash Flow Statement
- Net Income
- D&A
- Stock-Based Compensation
- Changes in Operating Assets & Liabilities
- Cash Flow from Operations
- Capital Expenditures
- Cash Flow from Investing
- Sale/Purchase of Securities
- Dividends Issued
- Cash Flow from Financing
Why this matters to bankers
Bankers live in financial statements. It’s critical to be fluent in the contents of the three financial statements to successfully create models and evaluate businesses.
Our recommendation is to grab a piece of paper and write each line item with a dash next to it like this: Capital Expenditures - Balance Sheet. You can also re-create a few income statements from 10-Ks.
It sounds elementary, but I can absolutely assure you that if you spend an hour handwriting 2-3x copies of different Income Statements, Balance Sheets and Cash Flow Statements, it will be one of the highest ROI activities that you do.