The Income Statement and Balance Sheet Connection [FIN0134]

Overview/Description
 This course examines in detail the relationship between the Income Statement and the Balance Sheet, how the line items on each statement relate to the other and correlate to business activities and decision-making. The course introduces common methods of analysis when using these financial statements to measure a business's financial performance.

Target Audience
 This course is targeted specifically for business managers, financial professionals, and other business professionals who have the need to understand financial statements.

Expected Duration
2.0 hours

Lesson Objectives:

The Asset Connection

  • recognize the benefit of understanding how the Asset side of the Balance Sheet relates to line items on the Income Statement when analyzing the numbers that are found on each statement.
  • analyze company efficiency based on the relationship between Sales on the Income Statement and Accounts Receivable on the Balance Sheet.
  • analyze company efficiency based on the relationship between the Cost of Goods Sold on the Income Statement and Inventory on the Balance Sheet.
  • recognize the relationship between Operating Expenses on the Income Statement and Prepaid Expenses on the Balance Sheet.
  • identify the relationship between Depreciation on the Income Statement and Fixed Assets on the Balance Sheet.
  • identify the relationship between Depreciation Expense on the Income Statement and Accumulated Depreciation on the Balance Sheet.

    • The Liability and Shareholders' Equity Connection

  • recognize the benefit of understanding how the Liabilities and Shareholders' Equity side of the Balance Sheet relates to line items on the Income Statement when analyzing the numbers that are found on each statement.
  • explain how Cost of Goods Sold on the Income Statement is accounted for in the line items of Accounts Payable and Inventory on the Balance Sheet.
  • describe the relationship between Accrued Liabilities on the Balance Sheet and Operating Expenses on the Income Statement.
  • describe the relationship between Interest Expense on the Income Statement and Accrued Liabilities on the Balance Sheet.
  • describe how Income Tax Expense is accounted for on the Income Statement and Income Taxes Payable is accounted for on the Balance Sheet.
  • describe the relationship between Net Income (profit) on the Income Statement and Retained Earnings and Shareholders' Equity on the Balance Sheet.

    • Course Number: FIN0134