Category: Accounting | Three Financial Statements
Articles
Why Does Depreciation Increase Cash Flow Even Though It Lowers Net Income?
Why does Depreciation lower Net Income but raise Cash Flow from Operations? A clear walkthrough of the D&A tax shield and how it flows through all three financial statements.
How to Answer the '3-Statement Depreciation Change' Interview Question
How to answer the classic 'what happens if Depreciation increases by $100' interview question: a step-by-step structure covering EBIT, Net Income, cash flow, and the balance sheet.
Why Does Net Income Rise But Cash Flow Fall When Revenue Grows?
When Revenue increases, Net Income and Cash Flow can move in opposite directions. Here's the Accounts Receivable mechanism that explains why — with a full worked example.
How to Answer the '3-Statement Revenue Increase' Interview Question
A step-by-step framework for the classic 'Revenue increases by $100' interview question — covering the margin assumption, EBIT, Net Income, cash flow, and the balance sheet check.
Does Buying Inventory Affect the Income Statement? Here's What Actually Happens
Buying inventory for cash doesn't touch the income statement — it's an asset swap. See exactly what happens to the balance sheet and cash flow statement instead.
3-Statement Interview Question: How to Answer 'Buy Inventory for Cash' Step by Step
A step-by-step framework for answering the classic 3-statement change interview question about buying inventory for cash, plus common follow-ups to expect.
Cases
Connect the Three Statements
Walk me through how the three financial statements connect to each other.
3-Statement Change: Depreciation Increases by $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if Depreciation & Amortization increases by $100 for the year, with everything else held constant.
3-Statement Change: Revenue Increases by $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if Revenue increases by $100 for the year, assuming the extra revenue flows through at a 40% margin, with everything else held constant.
3-Statement Change: Buy $100 of Inventory for Cash
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company buys $100 of inventory for cash, with everything else held constant.