I am in muggy Washington DC for finance training with NAB (National Association of Broadcasting). At BLI we do two training for NAB every year. The classes are always lively. The group is never afraid to speak up. After all they are all from the broadcasting industry. The session today was not different from those in the past. We learned about the income statement and the balance sheet with a little cash sprinkled in at the end. Lots of material covered in a little more than half a day.
The class looked at numbers for CBS. The last two years looked pretty good on the income statement with nice margin improvements. We decided that things were looking pretty good for the business. On the other hand, when we took a look at the balance sheet we saw in the equity section a different story. In the equity section of the statement there was an accumulated deficit of over 20 billion. This means that in spite of the good years lately CBS has sustained huge losses in the past. One would want to better understand the nature of those past losses to really understand CBS as a business. Did the past losses come from a couple of really tough years or from many years of smaller losses?
While the income statement provides profitability over a three year period balance sheet provides a longer-term perspective. Both statements need to be considered to see a more complete picture of the business.