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Cash Flow Links with the Balance SheetEven though I cover the balance sheet in the next chapter, I can't talk about cash without relating the cash flow to the balance. The three most important financial statements in a plan, income statement (profit and loss), cash flow, and balance sheet, are all related to each other. This next illustration shows the sample balance sheet linked to the cash flow in the previous illustration. Most of the rows on this balance sheet are directly affected by the cash flow, and need to change every time the cash changes. To close the circle in this chapter, let's look in detail at the balance: Related Balance Sheet
The information on the balance sheet should follow from the income statement and the cash flow. Notice, for example, how Long-term Liabilities, above, respond in March to a new loan and a regular principal payment of an existing loan shown in the Cash Flow table on page 16.9.
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