Question
The three financial statements model consists of the Balance Sheet, Income Statement, and Cash Flow Statement. The Balance Sheet provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time. The Income Statement shows the company's revenues, costs, and expenses over a period of time, providing information about the company's ability to generate profit by increasing revenue, reducing costs, or both. The Cash Flow Statement shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
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The statement starts with revenue. This is straightforward: it's just the total earnings from goods sold or services provided. From here, subtract the cost of goods sold (COGS), which are the direct costs associated with production. This yields the gross profit, which is a preliminary indicator of profitability that reflects the margin between sales and production costs.
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