How do the three financial statements link together?

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IBPrep · Accepted Answer

Several connection points. Net income from the income statement increases retained earnings on the balance sheet and starts the cash flow statement. D&A from the IS is added back on the CFS as a non-cash item. CapEx on the CFS (a cash outflow) increases gross PP&E on the balance sheet. New debt in the financing section of the CFS increases long-term debt on the BS. And the ending cash on the CFS equals the cash line on the BS.

How do the three financial statements link together?

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