M&I Guides (Technicals) 2026
Exam Questions and Verified
Answers | Already Graded A+
Walk me through the 3 financial statements. - 🧠 ANSWER ✔✔"The 3 major
financial statements are the Income Statement, Balance Sheet and Cash
Flow Statement.
The Income Statement gives the company's revenue and expenses, and
goes down to Net Income, the final line on the statement.
,The Balance Sheet shows the company's Assets - its resources - such as
Cash, Inventory and PP&E, as well as its Liabilities - such as Debt and
Accounts Payable - and Shareholders' Equity. Assets must equal Liabilities
plus Shareholders' Equity.
The Cash Flow Statement begins with Net Income, adjusts for non-cash
expenses and working capital changes, and then lists cash flow from
investing and financing activities; at the end, you see the company's net
change in cash."
How do the 3 statements link together? - 🧠 ANSWER ✔✔"To tie the
statements together, Net Income from the Income Statement flows into
Shareholders' Equity on the Balance Sheet, and into the top line of the
Cash Flow Statement. Changes to Balance Sheet items appear as working
capital changes on the Cash Flow Statement, and investing and financing
activities affect Balance Sheet items such as PP&E, Debt and
Shareholders' Equity. The Cash and Shareholders' Equity items on the
Balance Sheet act as "plugs," with Cash flowing in from the final line on the
Cash Flow Statement."
If I were stranded on a desert island, only had 1 statement and I wanted to
review the overall health of a company - which statement would I use and
,why? - 🧠 ANSWER ✔✔You would use the Cash Flow Statement because it
gives a true picture of how much cash the company is actually generating,
independent of all the non-cash expenses you might have. And that's the
#1 thing you care about when analyzing the overall financial health of any
business - its cash flow.
Let's say I could only look at 2 statements to assess a company's
prospects - which 2 would I use and why? - 🧠 ANSWER ✔✔You would pick
the Income Statement and Balance Sheet, because you can create the
Cash Flow Statement from both of those (assuming, of course that you
have "before" and "after" versions of the Balance Sheet that correspond to
the same period the Income Statement is tracking).
**Walk me through how Depreciation going up by $10 would affect the
statements. - 🧠 ANSWER ✔✔Income Statement: Operating Income would
decline by $10 and assuming a 40% tax rate, Net Income would go down
by $6.
Cash Flow Statement: The Net Income at the top goes down by $6, but the
$10 Depreciation is a non-cash expense that gets added back, so overall
Cash Flow from Operations goes up by $4. There are no changes
elsewhere, so the overall Net Change in Cash goes up by $4.
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2026. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
3
, Balance Sheet: Plants, Property & Equipment goes down by $10 on the
Assets side because of the Depreciation, and Cash is up by $4 from the
changes on the Cash Flow Statement.
Overall, Assets is down by $6. Since Net Income fell by $6 as well,
Shareholders' Equity on the Liabilities & Shareholders' Equity side is down
by $6 and both sides of the Balance Sheet balance.
If Depreciation is a non-cash expense, why does it affect the cash balance?
- 🧠 ANSWER ✔✔Although Depreciation is a non-cash expense, it is tax-
deductible. Since taxes are a cash expense, Depreciation affects cash by
reducing the amount of taxes you pay.
What happens when Accrued Compensation goes up by $10? - 🧠
ANSWER ✔✔No changes to the Income Statement.
On the Cash Flow Statement Accrued Compensation is a liability, so an
increase adds to your Cash Flow from Operations in the Changes in
Working Capital category. Cash Flow from Operations then goes up by
$10, as does the Net Change in Cash at the bottom.
Exam Questions and Verified
Answers | Already Graded A+
Walk me through the 3 financial statements. - 🧠 ANSWER ✔✔"The 3 major
financial statements are the Income Statement, Balance Sheet and Cash
Flow Statement.
The Income Statement gives the company's revenue and expenses, and
goes down to Net Income, the final line on the statement.
,The Balance Sheet shows the company's Assets - its resources - such as
Cash, Inventory and PP&E, as well as its Liabilities - such as Debt and
Accounts Payable - and Shareholders' Equity. Assets must equal Liabilities
plus Shareholders' Equity.
The Cash Flow Statement begins with Net Income, adjusts for non-cash
expenses and working capital changes, and then lists cash flow from
investing and financing activities; at the end, you see the company's net
change in cash."
How do the 3 statements link together? - 🧠 ANSWER ✔✔"To tie the
statements together, Net Income from the Income Statement flows into
Shareholders' Equity on the Balance Sheet, and into the top line of the
Cash Flow Statement. Changes to Balance Sheet items appear as working
capital changes on the Cash Flow Statement, and investing and financing
activities affect Balance Sheet items such as PP&E, Debt and
Shareholders' Equity. The Cash and Shareholders' Equity items on the
Balance Sheet act as "plugs," with Cash flowing in from the final line on the
Cash Flow Statement."
If I were stranded on a desert island, only had 1 statement and I wanted to
review the overall health of a company - which statement would I use and
,why? - 🧠 ANSWER ✔✔You would use the Cash Flow Statement because it
gives a true picture of how much cash the company is actually generating,
independent of all the non-cash expenses you might have. And that's the
#1 thing you care about when analyzing the overall financial health of any
business - its cash flow.
Let's say I could only look at 2 statements to assess a company's
prospects - which 2 would I use and why? - 🧠 ANSWER ✔✔You would pick
the Income Statement and Balance Sheet, because you can create the
Cash Flow Statement from both of those (assuming, of course that you
have "before" and "after" versions of the Balance Sheet that correspond to
the same period the Income Statement is tracking).
**Walk me through how Depreciation going up by $10 would affect the
statements. - 🧠 ANSWER ✔✔Income Statement: Operating Income would
decline by $10 and assuming a 40% tax rate, Net Income would go down
by $6.
Cash Flow Statement: The Net Income at the top goes down by $6, but the
$10 Depreciation is a non-cash expense that gets added back, so overall
Cash Flow from Operations goes up by $4. There are no changes
elsewhere, so the overall Net Change in Cash goes up by $4.
COPYRIGHT©NINJANERD 2025/2026. YEAR PUBLISHED 2026. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE. PRIVACY
STATEMENT. ALL RIGHTS RESERVED
3
, Balance Sheet: Plants, Property & Equipment goes down by $10 on the
Assets side because of the Depreciation, and Cash is up by $4 from the
changes on the Cash Flow Statement.
Overall, Assets is down by $6. Since Net Income fell by $6 as well,
Shareholders' Equity on the Liabilities & Shareholders' Equity side is down
by $6 and both sides of the Balance Sheet balance.
If Depreciation is a non-cash expense, why does it affect the cash balance?
- 🧠 ANSWER ✔✔Although Depreciation is a non-cash expense, it is tax-
deductible. Since taxes are a cash expense, Depreciation affects cash by
reducing the amount of taxes you pay.
What happens when Accrued Compensation goes up by $10? - 🧠
ANSWER ✔✔No changes to the Income Statement.
On the Cash Flow Statement Accrued Compensation is a liability, so an
increase adds to your Cash Flow from Operations in the Changes in
Working Capital category. Cash Flow from Operations then goes up by
$10, as does the Net Change in Cash at the bottom.
