CFA Level I - Financial Statement Analysis (FSA)

The multi-step Income Statement flows as follows:
$$\text{Revenue}-\text{COGS}=\text{Gross Profit}$$
\text{Gross Profit} - \text{Operating Expenses (SG&A, R&D)} = \text{Operating Income (EBIT)}
$$\text{EBIT}-\text{Interest Expense}+\text{Non-Operating Income}=\text{EBT}$$
$$\text{EBT}-\text{Tax Expense}=\text{Net Income}$$

Revenue is recognized when control of a promised good or service transfers to the customer. It follows a 5-step model:
1. Identify the contract(s) with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to performance obligations.
5. Recognize revenue when (or as) the entity satisfies a performance obligation.

1. Cash Flow from Operations (CFO): Transactions involving principal revenue-producing activities and day-to-day operations.
2. Cash Flow from Investing (CFI): Cash spent on or generated from long-term productive assets (PP&E) and non-operating investments.
3. Cash Flow from Financing (CFF): Cash receipts and payments from equity holders and debt capital providers.

Note: Total reported CFO is identical under both methods.