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ACCOUNTING CRASH COURSE EXAM V4 FROM
WALL STREET PREP ACTUAL EXAM QUESTIONS
AND CORRECT ANSWERS||VERIFIED EXAM!!!
GRADED A+ 2026 ACTUAL WSP ACCOUNTING
CRASH COURSE EXAM LATEST EXAM VERSION
4||NEWEST EXAM!!!
What are the 3 financial statements, and why do we need
them? - Answers-The 3 major financial statements are the
Income Statement, Balance Sheet, and Cash Flow
Statement.
The Income Statement shows the company's revenue,
expenses, and taxes over a period and
ends with Net Income, which represents the company's
after-tax profits.
The Balance Sheet shows the company's Assets - its
resources - as well as how it paid for those
resources - its Liabilities and Equity - at a specific point in
time. Assets must equal Liabilities
plus Equity.
The Cash Flow Statement begins with Net Income, adjusts
for non-cash items and changes in
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operating assets and liabilities (working capital), and then
shows the company's cash from
Investing or Financing activities; the last lines show the net
change in cash and the company's
ending cash balance.
You need these statements because there is a big
difference between a company's Net Income
and the cash it generates - the Income Statement alone
doesn't tell what its cash flow is.
Remember the key valuation formula:
Company Value = Cash Flow / (Discount Rate - Cash Flow
Growth Rate)
The 3 financial statements let you estimate the "Cash
Flow" part, which helps you value the
company more accurately.
How do the 3 statements link together? - Answers-To link
the statements, make Net Income from the Income
Statement the top line of the Cash
Flow Statement.
Then, adjust this Net Income number for any non-cash
items such as Depreciation &
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Amortization.
Next, reflect changes to operational Balance Sheet items
such as Accounts Receivable, which
may increase or decrease the company's cash flow
depending on how they've changed.
This gets you to Cash Flow from Operations.
Next, take into account investing and financing activities,
which may increase or decrease cash
flow, and sum up Cash Flow from Operations, Investing,
and Financing to get the net change in
cash at the bottom.
Link Cash on the Balance Sheet to the ending Cash
number on the CFS, and add Net Income to
Retained Earnings within the Equity category on the
Balance Sheet.
Then, link each non-cash adjustment to the appropriate
Asset or Liability; SUBTRACT links on
the Assets side and ADD links on the L&E side.
And then link each CFI and CFF item to the matching item
on the Balance Sheet, using the same
rule as above.
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Check that Assets equals Liabilities plus Equity at the end;
if this is not true, you did something
wrong and need to re-check your work
What's the most important financial statement? - Answers-
The Cash Flow Statement is the most important single
statement because it tells you how much
cash a company is generating. The Income Statement is
misleading because it includes non-cash
revenue and expenses and excludes cash spending such
as Capital Expenditures.
What if you could use only 2 statements to assess a
company's prospects - which ones
would you use, and why? - Answers-You would use the
Income Statement and Balance Sheet because you can
create the Cash Flow
Statement from both of those (assuming there are
"Beginning" and "Ending" Balance Sheets
that correspond to the same period shown on the Income
Statement)
ACCOUNTING CRASH COURSE EXAM V4 FROM
WALL STREET PREP ACTUAL EXAM QUESTIONS
AND CORRECT ANSWERS||VERIFIED EXAM!!!
GRADED A+ 2026 ACTUAL WSP ACCOUNTING
CRASH COURSE EXAM LATEST EXAM VERSION
4||NEWEST EXAM!!!
What are the 3 financial statements, and why do we need
them? - Answers-The 3 major financial statements are the
Income Statement, Balance Sheet, and Cash Flow
Statement.
The Income Statement shows the company's revenue,
expenses, and taxes over a period and
ends with Net Income, which represents the company's
after-tax profits.
The Balance Sheet shows the company's Assets - its
resources - as well as how it paid for those
resources - its Liabilities and Equity - at a specific point in
time. Assets must equal Liabilities
plus Equity.
The Cash Flow Statement begins with Net Income, adjusts
for non-cash items and changes in
,2|Page
operating assets and liabilities (working capital), and then
shows the company's cash from
Investing or Financing activities; the last lines show the net
change in cash and the company's
ending cash balance.
You need these statements because there is a big
difference between a company's Net Income
and the cash it generates - the Income Statement alone
doesn't tell what its cash flow is.
Remember the key valuation formula:
Company Value = Cash Flow / (Discount Rate - Cash Flow
Growth Rate)
The 3 financial statements let you estimate the "Cash
Flow" part, which helps you value the
company more accurately.
How do the 3 statements link together? - Answers-To link
the statements, make Net Income from the Income
Statement the top line of the Cash
Flow Statement.
Then, adjust this Net Income number for any non-cash
items such as Depreciation &
,3|Page
Amortization.
Next, reflect changes to operational Balance Sheet items
such as Accounts Receivable, which
may increase or decrease the company's cash flow
depending on how they've changed.
This gets you to Cash Flow from Operations.
Next, take into account investing and financing activities,
which may increase or decrease cash
flow, and sum up Cash Flow from Operations, Investing,
and Financing to get the net change in
cash at the bottom.
Link Cash on the Balance Sheet to the ending Cash
number on the CFS, and add Net Income to
Retained Earnings within the Equity category on the
Balance Sheet.
Then, link each non-cash adjustment to the appropriate
Asset or Liability; SUBTRACT links on
the Assets side and ADD links on the L&E side.
And then link each CFI and CFF item to the matching item
on the Balance Sheet, using the same
rule as above.
, 4|Page
Check that Assets equals Liabilities plus Equity at the end;
if this is not true, you did something
wrong and need to re-check your work
What's the most important financial statement? - Answers-
The Cash Flow Statement is the most important single
statement because it tells you how much
cash a company is generating. The Income Statement is
misleading because it includes non-cash
revenue and expenses and excludes cash spending such
as Capital Expenditures.
What if you could use only 2 statements to assess a
company's prospects - which ones
would you use, and why? - Answers-You would use the
Income Statement and Balance Sheet because you can
create the Cash Flow
Statement from both of those (assuming there are
"Beginning" and "Ending" Balance Sheets
that correspond to the same period shown on the Income
Statement)
