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Costing is the process of ASCERTAINING costs whereas cost ACCOUNTING is the process of recording VARIOUS costs in a systematic manner, in ORDER to prepare statistical DATE to ascertain cost.

Costing is the process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in order to prepare statistical date to ascertain cost.

Composite cost of CAPITAL is also known as WEIGHTED average cost of capital which is a measurable unit for it. It also tells about the component costs of common stock, preferred stock, and debt. Each of these components is given a weight on the basis of the associated interest rate and other gains and losses with it. It shows the cost of each additional capital as against the average cost of total capital raised. The process to compute this is first COMPUTING the weighted average cost of capital which is the collection of weights of other costs summed together.

The formula is given as:
WACC= Wd (cost of debt) + WS (cost of stock/RE) + Wp (cost of pf. Stock)

In this the cost of debt is CALCULATED in the beginning and it is used to find out the cost of capital and other weights of cost is been calculated after the calculation each and every individual weight of the component is added and then it gives the final composite cost.

Composite cost of capital is also known as weighted average cost of capital which is a measurable unit for it. It also tells about the component costs of common stock, preferred stock, and debt. Each of these components is given a weight on the basis of the associated interest rate and other gains and losses with it. It shows the cost of each additional capital as against the average cost of total capital raised. The process to compute this is first computing the weighted average cost of capital which is the collection of weights of other costs summed together.

The formula is given as:
WACC= Wd (cost of debt) + Ws (cost of stock/RE) + Wp (cost of pf. Stock)

In this the cost of debt is calculated in the beginning and it is used to find out the cost of capital and other weights of cost is been calculated after the calculation each and every individual weight of the component is added and then it gives the final composite cost.

The PRINCIPLES of capital structure management which are ESSENTIALLY REQUIRED are as follows:

1. Cost PRINCIPLE
2. Risk Principle
3. Control Principle
4. FLEXIBILITY Principle
5. Timing Principle

The principles of capital structure management which are essentially required are as follows:

Capitalization is a collection of share capital, loans, reserves and debentures. It represents permanent investment in companies and it also removes the need of long-term loan plans. It is used to show the REALITY of the industry by PROMOTING competition, development, profit and investment between individuals, companies and businesses. BALANCE capitalization is part of this Capitalization only where it is compared to the RELATIVE importance, value and other things to MAKE it proportionate in every sense. In balance capitalization debits and credits should be equal on both sides and the share should be shared among all in equal proportions.

Capitalization is a collection of share capital, loans, reserves and debentures. It represents permanent investment in companies and it also removes the need of long-term loan plans. It is used to show the reality of the industry by promoting competition, development, profit and investment between individuals, companies and businesses. Balance capitalization is part of this Capitalization only where it is compared to the relative importance, value and other things to make it proportionate in every sense. In balance capitalization debits and credits should be equal on both sides and the share should be shared among all in equal proportions.

There are two systems of ACCOUNTING:

1. Cash System of Accounting: This system records only cash receipts and PAYMENTS. This system assumes that there are no credit transactions. In this system of accounting, expenses are considered only when they are paid and incomes are considered when they are actually received. This system is USED by the organizations which are established for non profit PURPOSE. But this system is considered to be defective in nature as it does not show the actual profits earned and the current state of affairs of the organization.

2. Mercantile or Accrual System of Accounting: In this system, expenses and incomes are considered during that period to which they pertain. This system of accounting is considered to be ideal but it may result into unrealized profits which might reflect in the books of the accounts on which the organization have to pay taxes too. All the company forms of organization are LEGALLY required to follow Mercantile or Accrual System of Accounting.

There are two systems of Accounting:

1. Cash System of Accounting: This system records only cash receipts and payments. This system assumes that there are no credit transactions. In this system of accounting, expenses are considered only when they are paid and incomes are considered when they are actually received. This system is used by the organizations which are established for non profit purpose. But this system is considered to be defective in nature as it does not show the actual profits earned and the current state of affairs of the organization.

2. Mercantile or Accrual System of Accounting: In this system, expenses and incomes are considered during that period to which they pertain. This system of accounting is considered to be ideal but it may result into unrealized profits which might reflect in the books of the accounts on which the organization have to pay taxes too. All the company forms of organization are legally required to follow Mercantile or Accrual System of Accounting.

PREFERENCE Capital is the capital which carries preference over Equity capital at the TIME of PAYMENT of dividend and at the time of winding up of the COMAPANY.

Preference Capital is the capital which carries preference over Equity capital at the time of Payment of dividend and at the time of winding up of the comapany.

• DEPRECIATION ACCOUNT DR
• Accomulated DEPRECITATION Account CR

No MATTER how EFFICIENTLY GOODS / services are produced, if they cannot be DELIVERED to the customer in the quickest possible time it is vain.

No matter how efficiently goods / services are produced, if they cannot be delivered to the customer in the quickest possible time it is vain.

Hedging is a tool to MINIMIZE the risks. It is thus like an 'insurance' where one pays a premium but gets an assured amount in case of some uncertain event to the extent of the loss actually suffered on an equally opposite position for which the hedge was done. Thus, hedger is different from arbitrageur and speculators, as the INTENTION here is not to maximize the profit but to minimize the loss.

E.g. In Capital Markets, suppose an investor has an equity PORTFOLIO of Rs. 2 lacs and the portfolio consists of all the major stocks of NIFTY. He thinks the market will improve in the long run but might go on a downside in the SHORTRUN. NIFTY today stands at 4300. To minimize the risk of downfall, he enters into an option contract by buying NIFTY-PUT of strike 4300 at a premium of, say, Rs. 100. Thus, the actual amount paid is Rs. 5,000(lot size of NIFTY is 50). Also, the number of NIFTY-PUTs to be bought will vary on the beta of the portfolio so as to completely hedge the positon. 

Hedging is a tool to minimize the risks. It is thus like an 'insurance' where one pays a premium but gets an assured amount in case of some uncertain event to the extent of the loss actually suffered on an equally opposite position for which the hedge was done. Thus, hedger is different from arbitrageur and speculators, as the intention here is not to maximize the profit but to minimize the loss.

E.g. In Capital Markets, suppose an investor has an equity portfolio of Rs. 2 lacs and the portfolio consists of all the major stocks of NIFTY. He thinks the market will improve in the long run but might go on a downside in the shortrun. NIFTY today stands at 4300. To minimize the risk of downfall, he enters into an option contract by buying NIFTY-PUT of strike 4300 at a premium of, say, Rs. 100. Thus, the actual amount paid is Rs. 5,000(lot size of NIFTY is 50). Also, the number of NIFTY-PUTs to be bought will vary on the beta of the portfolio so as to completely hedge the positon. 

Earning PER SHARE THATS portion of stehcompay profit.

Earning per share thats portion of stehcompay profit.

Internal RATE of RETURN is that rate of Return at which the net present VALUE is equal to ZERO or it is the Rate which equates the present value of the cash inflows to the cash OUTFLOWS.

Internal Rate of Return is that rate of Return at which the net present value is equal to Zero or it is the Rate which equates the present value of the cash inflows to the cash outflows.

RAROC is a risk-adjusted framework for profitability measurement and profitability MANAGEMENT. It is a tool for measuring risk-adjusted financial performance. And it provides a uniform view of profitability across businesses (Strategic Business Units / divisions). RAROC and related CONCEPTS such as RORAC and RARORAC are MAINLY used within (business lines of) banks and INSURANCE companies. RAROC is defined as the ratio of risk-adjusted return to economic capital.

RAROC is a risk-adjusted framework for profitability measurement and profitability management. It is a tool for measuring risk-adjusted financial performance. And it provides a uniform view of profitability across businesses (Strategic Business Units / divisions). RAROC and related concepts such as RORAC and RARORAC are mainly used within (business lines of) banks and insurance companies. RAROC is defined as the ratio of risk-adjusted return to economic capital.

Calls give the BUYER the RIGHT but not the obligation to buy a given quantity of the UNDERLYING asset, at a given price on or before a given FUTURE date.

Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date.

Secondary market refers to market where SECURITIES are TRADED after being INITIALLY OFFERED to the public in the primary market and/or listed on the STOCK exchange.

Secondary market refers to market where securities are traded after being initially offered to the public in the primary market and/or listed on the stock exchange.

In BUSINESS, a takeover is the PURCHASE of ONE COMPANY by ANOTHER.

In business, a takeover is the purchase of one company by another.

Fair Value is an ACCOUNTING expression, ORIGINALLY defined by the SEC.Under GAAP, the Fair Value of an asset is the amount at which that asset could be bought or SOLD in a current transaction between willing parties, other than in a liquidation. On the other side of the balance sheet, the Fair Value of a LIABILITY is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in a liquidation.

If available, a quoted market PRICE in an active market is the best evidence of Fair Value and should be used as the basis for the measurement. If a quoted market price is not available, preparers should make an estimate of Fair Value using the best information available in the circumstances. In many circumstances, quoted market prices are unavailable. As a result, making estimates of Fair Value is often difficult.

Fair Value is an accounting expression, originally defined by the SEC.Under GAAP, the Fair Value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, other than in a liquidation. On the other side of the balance sheet, the Fair Value of a liability is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in a liquidation.

If available, a quoted market price in an active market is the best evidence of Fair Value and should be used as the basis for the measurement. If a quoted market price is not available, preparers should make an estimate of Fair Value using the best information available in the circumstances. In many circumstances, quoted market prices are unavailable. As a result, making estimates of Fair Value is often difficult.

Crossover rates have to do with the amount of earnings that are generated by two different but similar projects. The crossover rate is the POINT at which the two projects achieve the same net PRESENT value. In TERMS of investments,calculating a crossover rate between two similar SECURITIES can help an investor determine what to buy and what to SELL.

Crossover rates have to do with the amount of earnings that are generated by two different but similar projects. The crossover rate is the point at which the two projects achieve the same net present value. In terms of investments,calculating a crossover rate between two similar securities can help an investor determine what to buy and what to sell.

An investor that wants the upside potential of equity but wants to minimize risk would buy preferred stock. The investor would receive steady interest-like payments (dividends) from the preferred stock that are more assured than the dividends from common stock.

The preferred stock OWNER GETS a superior right to the company's assets should the company go bankrupt.

A corporation would INVEST in preferred stock because the dividends on preferred stock are TAXED at a lower rate than the interest rates on bonds.

An investor that wants the upside potential of equity but wants to minimize risk would buy preferred stock. The investor would receive steady interest-like payments (dividends) from the preferred stock that are more assured than the dividends from common stock.

The preferred stock owner gets a superior right to the company's assets should the company go bankrupt.

A corporation would invest in preferred stock because the dividends on preferred stock are taxed at a lower rate than the interest rates on bonds.

Investment and asset are really close in meaning.Investment is when you put your money in stock, BOND or other FINANCIAL instruments. Whereas Asset is what you own generally reffered to land, proprietorship , factory, etc.

Investment and asset are really close in meaning.Investment is when you put your money in stock, bond or other financial instruments. Whereas Asset is what you own generally reffered to land, proprietorship , factory, etc.

Demat MEANS DEMATERIALISATION of share, in SIMPLE it is an account with which a person can trade in security market WITHOUT which a person cannot buy or sell any share in security market.

Demat means Dematerialisation of share, in simple it is an account with which a person can trade in security market without which a person cannot buy or sell any share in security market.

Different investors have different strategies. Some look for UNDERVALUED stocks, OTHERS for stocks with growth POTENTIAL and YET others for stocks with steady PERFORMANCE. A strategy could also be focused on the long-term or short-term, and be more risky or less risky. Whatever your investing strategy is, you should be able to articulate these attributes.

Different investors have different strategies. Some look for undervalued stocks, others for stocks with growth potential and yet others for stocks with steady performance. A strategy could also be focused on the long-term or short-term, and be more risky or less risky. Whatever your investing strategy is, you should be able to articulate these attributes.

It is STATEMENT of balances of all the ACCOUNTS in the ledger prepared to PROVE the arithmetical ACCURACY of the books of accounts.

It is statement of balances of all the accounts in the ledger prepared to prove the arithmetical accuracy of the books of accounts.

A startup TYPICALLY has more risk than a well-established firm. The kind of stocks that ONE would issue for a startup would be those that protect the downside of equity holders while GIVING them upside. Hence the STOCK issued may be a combination of COMMON stock, preferred stock and debt notes with warrants (options to buy stock).

A startup typically has more risk than a well-established firm. The kind of stocks that one would issue for a startup would be those that protect the downside of equity holders while giving them upside. Hence the stock issued may be a combination of common stock, preferred stock and debt notes with warrants (options to buy stock).

In economic terms, inflation is the rise in the prices of goods and services in the GIVEN economy over a PERIOD of TIME. As the prices rise, each unit of the country's currency will buy fewer goods and services.

In economic terms, inflation is the rise in the prices of goods and services in the given economy over a period of time. As the prices rise, each unit of the country's currency will buy fewer goods and services.

The bondholder is always more SENIOR. STOCKHOLDERS (INCLUDING those who own preferred stock) must wait until bondholders are paid during a bankruptcy before CLAIMING company assets.

The bondholder is always more senior. Stockholders (including those who own preferred stock) must wait until bondholders are paid during a bankruptcy before claiming company assets.

TYPES of insurance:
1. Auto insurance.
2. HOME insurance.
3. HEALTH insurance.
4. Disability.
5. casualty.
6. life.
7. property.
8. other types insurance.
9. insurance financing vehicles.
10. closed COMMUNITY SELF insurance.

Types of insurance:
1. Auto insurance.
2. home insurance.
3. health insurance.
4. Disability.
5. casualty.
6. life.
7. property.
8. other types insurance.
9. insurance financing vehicles.
10. closed community self insurance.

A financial MARKET of a GROUP of securities in which prices are rising or are EXPECTED to RISE.

A financial market of a group of securities in which prices are rising or are expected to rise.

The DCF for an investment is calculated by estimating: the cash that you will have to pay out, and the cash which you expect to receive back. The timeframes that you expect to receive the payments must ALSO be estimated. Each cash TRANSACTION must then be recalculated, by SUBTRACTING the OPPORTUNITY cost of capital between now and the moment when you will pay or receive the cash.

The DCF for an investment is calculated by estimating: the cash that you will have to pay out, and the cash which you expect to receive back. The timeframes that you expect to receive the payments must also be estimated. Each cash transaction must then be recalculated, by subtracting the opportunity cost of capital between now and the moment when you will pay or receive the cash.

AUTHORIZED CAPITAL is the MAXIMUM capital that a COMPANY is authorized to RAISE.

Authorized capital is the maximum capital that a company is authorized to raise.

A "Put option" gives the holder the RIGHT but not obligation to sell an asset by a CERTAIN DATE for a certain price.

A "Put option" gives the holder the right but not obligation to sell an asset by a certain date for a certain price.

Deferred TAX asset ARISES when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a REPORTING period.

Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.

Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period.

Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.

Deferred tax liability is a tax expense amount reported on a company’s INCOME STATEMENT that is not actually paid to the IRS in that time period, but is expected to be paid in the FUTURE. It arises because when a company actually pays LESS in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can LEAD to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.

Deferred tax liability is a tax expense amount reported on a company’s income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.

NET INCOME FLOWS into RETAINED EARNINGS.

Net income flows into retained earnings.

Absolutely. Two examples INVOLVE unsustainable IMPROVEMENTS in working capital (a company is SELLING off inventory and delaying payables), and ANOTHER example involves lack of REVENUES going forward.in the pipeline

Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward.in the pipeline

TWO examples INCLUDE deterioration of working capital (i.e. increasing accounts receivable, LOWERING accounts payable), and financial SHENANIGANS.

Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash OUTFLOW (cash flow statement).
Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while RETAINED EARNINGS go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement).
Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

CAPITAL expenditures are capitalized because of the timing of their estimated benefits – the LEMONADE STAND will benefit the firm for many years. The EMPLOYEES’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what DIFFERENTIATES an asset from an expense.

Capital expenditures are capitalized because of the timing of their estimated benefits – the lemonade stand will benefit the firm for many years. The employees’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what differentiates an asset from an expense.

• Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred TAXES) to arrive at CASH flows from operating activities.
• Mention capital expenditures, ASSET sales, purchase of intangible assets, and purchase/sale of investment SECURITIES to arrive at cash flow from investing activities.
• Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from FINANCING activities.
• Adding cash flows from operations, cash flows from investments, and cash flows from financing gets you to total change of cash.
• Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-period cash balance.

A DEBENTURE is " A certificate of agreement of loans which is given under the company's STAMP and carries an undertaking that the debenture holder will get a fixed RETURN and the principal AMOUNT whenever the debenture MATURES.

A Debenture is " A certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return and the principal amount whenever the debenture matures.

• A journal is also called as a book of prime entry.
• transactions OCCURED are first entered in this book to show which ACCOUNTS should be debited and which should be credited. 
• on the basis of ENTRIES made in the journal, accounts are prepared, the book which CONTAINS the accounts is called a ledger. 
• transactions entered in the journal are CLASSIFIED according to their nature and posted in their respective accounts in ledger. 
• it is also called as book of final entry.

CareCredit's HEALTHCARE financing is unique. Unlike a traditional credit card, CareCredit offers financing specifically for healthcare treatments and procedures. These treatments can include much needed family dental work, cosmetic surgery or even veterinary services for your family's pet. It's easy to apply for CareCredit financing ONLINE at carecredit.com and you find out instantly if you are approved. CareCredit also GIVES you a 'No Interest' option, as well as an Extended Payment Plan (EPP) which helps you select a payment plan that works for you. This convenience allows you to start using your CareCredit ACCOUNT immediately. CareCredit healthcare financing is accepted at 100,000 practices, which makes finding a participating provider simple. 

CareCredit's healthcare financing is unique. Unlike a traditional credit card, CareCredit offers financing specifically for healthcare treatments and procedures. These treatments can include much needed family dental work, cosmetic surgery or even veterinary services for your family's pet. It's easy to apply for CareCredit financing online at carecredit.com and you find out instantly if you are approved. CareCredit also gives you a 'No Interest' option, as well as an Extended Payment Plan (EPP) which helps you select a payment plan that works for you. This convenience allows you to start using your CareCredit account immediately. CareCredit healthcare financing is accepted at 100,000 practices, which makes finding a participating provider simple. 

NETWORTH is the TOTAL assets MINUS total LIABILITIES of a company.

Networth is the total assets minus total liabilities of a company.

Treasury Bills are MONEY market instruments to finance the short term REQUIREMENTS of the Government of INDIA. These are discounted securities and THUS are issued at a discount to FACE value.

Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value.

Nominal money is RELATED to the measure of counting. nominal figure is what is written on the bill. where as REAL money relates to it's purchasing POWER.

for eg: if 10 units in nominal money can buy 2 chocolates in 1980 and 1 chocolate in 2000, in the same WAY, 10 units of nominal money is 10UNITS of real money in 1980 and 5 units of real money in 2000.

Nominal money is related to the measure of counting. nominal figure is what is written on the bill. where as real money relates to it's purchasing power.

for eg: if 10 units in nominal money can buy 2 chocolates in 1980 and 1 chocolate in 2000, in the same way, 10 units of nominal money is 10units of real money in 1980 and 5 units of real money in 2000.

A deferred tax liability is just the opposite of a deferred tax asset. The deferred tax liability occurs when a tax expense reported on the income statement is not paid to the IRS during the same period it is recognized--it's paid at a future date. Deferred tax liabilities can result when there are differences in depreciation expense between book REPORTING (GAAP) and IRS reporting which lead to differences income as reflected on a companies income statement versus what's reported to the IRS--and which results in lower TAXES PAYABLE to the IRS (in the short RUN).

A deferred tax liability is just the opposite of a deferred tax asset. The deferred tax liability occurs when a tax expense reported on the income statement is not paid to the IRS during the same period it is recognized--it's paid at a future date. Deferred tax liabilities can result when there are differences in depreciation expense between book reporting (GAAP) and IRS reporting which lead to differences income as reflected on a companies income statement versus what's reported to the IRS--and which results in lower taxes payable to the IRS (in the short run).

A deferred TAX asset (as its name suggests) is when a company pays more in taxes to the IRS than they ACTUALLY owe (as shown as an expense on their income statement). This is an asset because it can be USED to offet future tax expense in the future. Deferred tax assets can result from differences in revenue recognition, expense recognition, and NET operating losses.

A deferred tax asset (as its name suggests) is when a company pays more in taxes to the IRS than they actually owe (as shown as an expense on their income statement). This is an asset because it can be used to offet future tax expense in the future. Deferred tax assets can result from differences in revenue recognition, expense recognition, and net operating losses.

NET INCOME has to be adjusted to reflect an increase in accounts receivable since the company never actually received the FUNDS. As the cash flow STATEMENT begins with net income, it shows a cash reduction what accounts received increases.

Net income has to be adjusted to reflect an increase in accounts receivable since the company never actually received the funds. As the cash flow statement begins with net income, it shows a cash reduction what accounts received increases.

Goodwill is an intangible asset that is defined as the excess value of the purchase price over the fair market value (book value) of an acquired business. For example, if Walmart is SOLD for $100 BILLION with PP&E book value of $50 billion, equity of $30 billion, and debt of $10 billion, then the goodwill PAID for Walmart would be $30 billion--the total sales price ($100 billion) minus the book value (Assets-Liabilities) of $70 billion.

The organization acquiring Walmart would SHOW a decrease in cash of $100 billion to finance the acquisition, an increase of $50 billion to PP&E, an increase of debt of $10 billion, and goodwill of $30 billion.

Goodwill is an intangible asset that is defined as the excess value of the purchase price over the fair market value (book value) of an acquired business. For example, if Walmart is sold for $100 billion with PP&E book value of $50 billion, equity of $30 billion, and debt of $10 billion, then the goodwill paid for Walmart would be $30 billion--the total sales price ($100 billion) minus the book value (Assets-Liabilities) of $70 billion.

The organization acquiring Walmart would show a decrease in cash of $100 billion to finance the acquisition, an increase of $50 billion to PP&E, an increase of debt of $10 billion, and goodwill of $30 billion.

At the time of the purchase, there is a cash OUTFLOW (cash flow statement) and PP&E goes up (balance sheet). Over the life of the asset it is depreciated. This shows up a reduction in net income (income statement) and PP&E (balance sheet) decreases by the AMOUNT depreciated. At the same time RETAINED earnings (balance sheet) also goes down. However, the depreciation is ADDED back in the cash from operations SECTION (cash flow statement) as it is a non-camsh expense the reduced net income.

At the time of the purchase, there is a cash outflow (cash flow statement) and PP&E goes up (balance sheet). Over the life of the asset it is depreciated. This shows up a reduction in net income (income statement) and PP&E (balance sheet) decreases by the amount depreciated. At the same time retained earnings (balance sheet) also goes down. However, the depreciation is added back in the cash from operations section (cash flow statement) as it is a non-camsh expense the reduced net income.

Absolutely. A company that's experiencing a deterioration of working CAPITAL (i.e. decrease in accounts payable, increase in accounts receivable) can SHOW positive net INCOME but be in financial trouble in the future. It's ALSO possible to show positive net income while in financial trouble by manipulating financial statements (e.g. revenue RECOGNITION, expense recognition, etc.)

Absolutely. A company that's experiencing a deterioration of working capital (i.e. decrease in accounts payable, increase in accounts receivable) can show positive net income but be in financial trouble in the future. It's also possible to show positive net income while in financial trouble by manipulating financial statements (e.g. revenue recognition, expense recognition, etc.)