What happens to each of the three primary financial statements when you change a) gross margin b) capital expenditures c) any other change?
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Answer Posted / Rakesh Kumar Singh
a) A change in gross margin affects the Income Statement by changing net income. The higher the gross margin, the higher the net income and vice versa. b) Capital expenditures affect the Cash Flow Statement as an investing activity, as they represent purchases of property, plant, and equipment or other long-term assets. c) Any other changes can impact all three primary financial statements depending on their nature. For example, a change in revenue would directly affect the Income Statement (and indirectly the Cash Flow Statement through operating activities), while a change in accounts payable would impact both the Balance Sheet and the Cash Flow Statement.
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