Financial Intelligence for IT Professionals: What You Really Need to Know About the Numbers

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The Income Statement Affects the Balance Sheet

So far we have been considering the balance sheet by itself. But here’s one of the best-kept secrets in the world of financial statements: a change affecting one statement nearly always has an impact on the other statements. So when you’re managing the income statement, whether for the company as a whole or for IT as a cost center, you’re also having an effect on the balance sheet. Part of developing your financial intelligence is understanding how information technology affects the balance sheet.

THE EFFECT OF PROFIT ON EQUITY

To see the relationship between profit, from the income statement, and equity, which appears on the balance sheet, we’ll look at a couple of examples. Here’s a highly ...