1) A few days ago i said something like:

Think of the company& #39;s financials as a vehicle

โ€ข Income Statement is the flashy (or beaten up) exterior

โ€ข Balance Sheet is the Fuel Tank

โ€ข Cash Flow Statement is the Engine
2) ๐“๐ก๐ž ๐ˆ๐ง๐œ๐จ๐ฆ๐ž ๐’๐ญ๐š๐ญ๐ž๐ฆ๐ž๐ง๐ญ

Something that is often overlooked, especially with newer investors is the fact that income statement is an ๐š๐œ๐œ๐ซ๐ฎ๐š๐ฅ based report of incomes

What does accrual based accounting mean i hear you say?
3) Johnny owns a coffee stand and his friend Sally comes over and buys $20 worth of coffee using a credit card

It is the last day of the financial year, and Johnny reports his income statement tomorrow

But Sally& #39;s card payment won& #39;t come for three days
4) The reality of this situation is that Johnny would record $20 in sales on his income statement, despite not actually receiving cash

The $20 in lieu would be an accounts receivable, in that he has provided the product/service but not yet been paid
5) "Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made"

The income statement can be easily manipulated by management to & #39;smooth& #39; earnings during good/bad years
6) If we were to take a look at Johnny& #39;s cash flow statement, we would see that he has not been paid $20

The income statement is usually my least important filing that i study
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