Dq Week2

DQ Week 2

In what ways do the elements of the four financial statements interact with one another?
They all play their own distinct roles and functions, but a change in one will effect the other. Like the balance sheet gives us a overview, a picture or a snapshot of how a company is doing. But say the statement of cash flow, it uses some of the same numbers and figures as the balance sheet , but it tells us a different story. It tells us the amount of cash flow we have within our business. It gives us a breakdown of where our cash is coming from and where its going. An ultimately, if there is enough cash flow to even run the business.

How might changing one of the financial statements affect the other financial statements?
By changing one thing on one financial statement and not on another, will make the other inaccurate. The financial statements overlap each other. When there is a change in one there will be an effect on the other. They basically depend on one another, seeing that they provide information that effects the other.

Why is it essential to understand the relationship between the financial statements?
It is essential to understand the relationships between the financial statements because they each play a slightly different role in reporting a company’s worth, its operating status, or its financial position. Such as the balance sheet that shows assets, liabilities and equity; it tells the company where they stand financially at a given or specified moment.