Wall Street Mojo IB Questions and answers verified to pass

Wall Street Mojo IB Questions and answers verified to pass Tell me about the three most important financial statements and what is their significance - correct answer The three main financial statements are the Income Statement, Balance Sheet and Cash Flow Statement. Speaking about their significance, the income statement provides with the revenue and expenses of a company and shows the final net income that it has made over a period of time. The balance sheet signifies the assets of a company such as plant, property & equipment, cash, inventory and other resources. Similarly, it reports the liabilities which includes the Shareholders equity, debt and accounts payable. The balance sheet is such that the assets would always equal the Liabilities plus shareholders equity. Lastly, there is the cash flow statement which reports the net change in Cash. It gives the cash flow from the operating, investing and financing activities of the company. In case you have the chance to evaluate the financial viability of the company which statement would you choose and why? - correct answer It would be the cash flow statement. The reason being that it provides a true picture of how much cash the business is generating in actual terms. The cash flows are hence the main thing you actually pay attention to while you are analyzing the overall financial health of the business. Let's say that the depreciation expense goes up by $100. How would this affect the financial statements? - correct answer Income Statement: With the depreciation expense decreasing Operating Income would decline by $100 and assuming a 40% tax rate, Net Income would go down by $60. Cash Flow Statement: The Net I