Finance Analyst Question:

Suppose I buy a piece of equipment, walk me through the impact on the 3 financial statement?

Tweet Share WhatsApp

Answer:

Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)

Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

Download Finance Analyst PDF Read All 59 Finance Analyst Questions
Previous QuestionNext Question
Tell me how do you see Greece's economy unfolding in the next few years due to their recent financial crisis?Explain me the single best evaluation metric for analyzing company stock?