What are the time dimensions of the income statement, the balance sheet, and the statement of cash flows? Hint: Are they videos or still pictures? Explain.
Sol.
- The income statement is similar to a video: It evaluates a firm's profitability over a period of time which can be a week, a month, a year, or any other time period.
- The balance sheet is alike to a still photograph. The balance sheet presents the firm's assets, liabilities and equity at a given point in time.
- This cash flow statement is alike to the income statement can be compared to a video: It illustrates how cash flows into and out of a company over a given period of time.