The Annual Operating Statements: The Income Statement and Cash Flow Statement

  • John B. GuerardJr.
  • Anureet Saxena
  • Mustafa Gultekin


The balance sheet of a company and the income statement are related. The balance sheet is an accounting snapshot at a point of time. The income, profit and loss, or operating statement is a condensation of the firm’s operating experiences over a given period of time. It depicts certain changes that have occurred between the last balance sheet and the present one. The balance sheet (position statement) and the income statement may be reconciled through the retained earnings, or earned surplus, account. If this reconciliation is presented formally, it becomes the surplus statement.


  1. Dtrina, R. E., & Largay III, J. A. (1985). Pitfalls in calculating cash flow from operations. The Accounting Review, 40, 314–326.Google Scholar
  2. Guerard Jr., J. B., & Schwartz, E. (2007). Quantitative corporate finance. New York: Springer.CrossRefGoogle Scholar
  3. Krishnan, G. V., & Largay III, J. A. (2000). The predictive ability of direct method cash flow information. Journal of Business Finance and Accounting, 27, 215–245.CrossRefGoogle Scholar
  4. White, G. I., Sondhi, A. C., & Fried, D. (1997). The analysis and use of financial statements (2nd ed.). New York: John Wiley & Sons, Inc. Chapters 2, 3.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2021

Authors and Affiliations

  • John B. GuerardJr.
    • 1
  • Anureet Saxena
    • 2
  • Mustafa Gultekin
    • 3
  1. 1.McKinley Capital Management, LLCAnchorageUSA
  2. 2.McKinley Capital Management, LLCStamfordUSA
  3. 3.Kenan-Flagler Business SchoolUniversity of North Carolina Chapel HillChapel HillUSA

Personalised recommendations