Practice: Financial Statements
Fourteen scored problems on reading an income statement, a balance sheet, and a cash flow statement, and on tracing the links between them, using one fictional company's numbers.
What you'll do
This set gives you the statements of Pine Ridge Cycles and asks you to work with them. You'll match each statement to the question it answers, sort items into assets, liabilities, and equity, rebuild retained earnings and equipment from one year to the next, turn net income into operating cash flow line by line, place cash movements in the right section, and arrive at free cash flow. If your figures agree with the statements, you've understood how the three fit together. Your score appears as you go, and nothing is recorded outside this browser.
This draws on
Pine Ridge Cycles is the fictional bicycle maker from the last practice set. Its statements are below. Keep them in view as you work, and check each answer once you've committed to it: the score counts your first try.
| Revenue | 250 |
|---|---|
| Cost of goods sold | (150) |
| Gross profit | 100 |
| Operating expenses | (60) |
| Operating income | 40 |
| Interest expense | (5) |
| Income tax | (7) |
| Net income | 28 |
Depreciation of $10 million is included in the costs above. Pine Ridge paid dividends of $8 million and has 14 million shares.
| Last year | This year | |
|---|---|---|
| Cash | 22 | 30 |
| Accounts receivable | 20 | 25 |
| Inventory | 38 | 45 |
| Property and equipment | 90 | 100 |
| Total assets | 170 | 200 |
| Accounts payable and accrued expenses | 26 | 30 |
| Debt | 64 | 70 |
| Total liabilities | 90 | 100 |
| Paid-in capital | 40 | 40 |
| Retained earnings | 40 | 60 |
| Total equity | 80 | 100 |
The problems in this practice set are for members
Inside, each with a worked answer: Three statements, three questions (2 problems); The balance sheet (2 problems); How the statements connect (2 problems); From profit to cash (6 problems); Earnings and cash (2 problems).
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.