Accounting

The three statements, how they link, and the questions every interviewer asks.

1. 1

   The income statement, line by line

   Revenue down to net income, one layer of cost at a time. What each subtotal means, why interest and taxes sit below operating income, and the margins interviewers actually ask about.

   6 min readAI AssistantPreview

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2. 2

   The balance sheet, both sides

   The balance sheet is a point-in-time snapshot of what a company owns and how it paid for it. Assets always equal liabilities plus equity, and knowing why is your check on every accounting answer.

   6 min readAI AssistantPreview

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3. 3

   The cash flow statement, section by section

   The cash flow statement reconciles accrual net income back to real cash across three sections (operating, investing, financing). This is how it's built and why profit is not the same as cash.

   6 min readAI AssistantPreview

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4. 4

   Walk me through the three statements

   What each of the three statements actually is, the subsections inside them, how they link, and the $10 depreciation walk interviewers use to test whether you really get it.

   7 min readAI AssistantPreview

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5. 5

   Depreciation goes up by $20... (Advanced)

   The most-asked technical on the Street, and a harder filter than the three-statement walk itself. The fixed order, the tax shield that makes cash rise, why it balances (net income drives retained earnings), and the two questions that solve any version of it.

   14 min readAI AssistantPreview

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6. 6

   Depreciation and amortization

   Depreciation and amortization spread the cost of long-lived assets over their useful life. Both are non-cash, both get added back on the cash flow statement, and the only real cash they move is the tax they save.

   5 min readAI AssistantPreview

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7. 7

   Working capital, and why it eats cash

   Working capital is the cash tied up in running the business day to day. When it grows, it drains cash and free cash flow, which is why fast-growing companies can be starved for cash even while profits look great.

   7 min readAI AssistantPreview

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8. 8

   EBITDA and the bridge to free cash flow

   What EBITDA actually is, why bankers lean on it, and the exact bridge from EBITDA to unlevered free cash flow. EBITDA is not cash. Capex, taxes, and working capital are the gap.

   7 min readAI AssistantPreview

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9. 9

   Deferred revenue

   Cash collected before you deliver the product is a liability, not revenue. Here's how deferred revenue works, why it never touches the income statement until earned, and why investors love the businesses that carry a lot of it.

   6 min readAI AssistantPreview

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10. 10

    Deferred taxes: DTAs and DTLsUpdated

    Deferred taxes are tax a company will pay or save later, because its income statement and its tax return count some income and expenses in different years. A DTL means more cash tax later, a DTA means less. Here is the one test that gets the direction right, and how each unwinds.

    6 min readAI AssistantPreview

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11. 11

    Goodwill and purchase accounting

    When a buyer pays more than the fair value of the identifiable net assets it acquires, the excess lands on the balance sheet as goodwill. Here is how purchase accounting actually works, why asset write-ups create a deferred tax liability, and why goodwill is tested for impairment, not amortized.

    7 min readAI AssistantPreview

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12. 12

    Diluted shares and the treasury stock method

    A company's share count is not one number. Basic vs diluted shares, where dilution comes from, and the treasury stock method worked step by step with clean numbers, plus why diluted shares are the count that drives equity value and EPS.

    5 min readAI AssistantPreview

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13. 13

    Stock-based compensation

    SBC is a real expense that reduces net income but burns no cash, so it gets added back on the cash flow statement. The catch is the dilution.

    7 min readAI AssistantPreview

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14. 14

    Dividends and buybacks

    The two ways a company hands cash back to shareholders. Dividends pay a steady amount per share; buybacks shrink the share count and lift EPS. Why neither creates value on its own, worked with clean numbers.

    5 min readAI AssistantPreview

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15. 15

    Operating leverage

    Operating leverage is how much of a company's cost base is fixed. High fixed costs mean a small revenue move produces a large profit move, up or down. Contribution margin, flow-through, and break-even explained.

    5 min readAI AssistantPreview

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16. 16

    Owning part of another companyUpdated

    A 10% stake, a 30% stake and a 70% stake are accounted for three different ways. How each one shows up on the three statements, and why the enterprise value bridge subtracts equity investments and adds noncontrolling interest.

    9 min readAI AssistantPreview

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17. 17

    Return ratios: ROE, ROA and ROICUpdated

    Return on equity, return on assets and return on invested capital each answer a different question. How to calculate them, why leverage pushes ROE above ROA, the DuPont breakdown, where each one misleads, and the current and quick ratios.

    8 min readAI AssistantPreview

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18. 18

    PIK interest through the three statementsUpdated

    Payment-in-kind interest is an expense that never leaves the bank account. How PIK flows through the income statement, cash flow statement and balance sheet, why sponsors and lenders use PIK and PIK toggle notes, and how original issue discount works the same way.

    8 min readAI AssistantPreview

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19. 19

    Cash vs. accrual accountingUpdated

    Why companies book revenue when they earn it rather than when they are paid, how the matching principle lines costs up against that revenue, how long contracts get recognized over time, and why accrual profit and cash drift apart.

    9 min readAI AssistantPreview

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20. 20

    Selling an asset: gains, losses and the three statementsUpdated

    What happens when a company sells a piece of equipment for more or less than its book value: the gain or loss on the income statement, why the gain comes out of operating cash flow while the full proceeds land in investing, and how the balance sheet ties.

    8 min readAI AssistantPreview

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21. 21

    Inventory: FIFO, LIFO and write-downsUpdated

    How the choice of inventory method changes cost of goods sold, profit, taxes and the balance sheet when costs are rising, why LIFO is banned under IFRS, and how an inventory write-down flows through all three statements.

    8 min readAI AssistantPreview

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22. 22

    Leases: operating, finance and the EV questionUpdated

    How leases work under ASC 842 and IFRS 16: why both kinds now sit on the balance sheet, how an operating lease's single lease cost differs from a finance lease's interest plus amortization, what that does to EBITDA, and when lease liabilities belong in enterprise value.

    9 min readAI AssistantPreview

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