Skip to content
Reportly AI
General Questions

What is FP&A? A plain-English guide for founders

DTDavid Tarkhanyan6 min read

If you can read three reports, you can understand almost any business: the income statement, the balance sheet, and the cash flow statement. Each answers a different question, and together they tell the full financial story of a company.

This guide walks through what each statement shows, how to read it, and how the three connect, so the numbers stop feeling like an accounting exercise and start driving real decisions.

Key takeaways

  • The income statement shows profitability over a period.
  • The balance sheet is a snapshot of what you own and owe.
  • The cash flow statement tracks the cash actually moving in and out.
  • Net income links the income statement to the balance sheet; cash links it to the cash flow statement.

The income statement

The income statement (or profit and loss) measures performance over a period. It starts with revenue, subtracts the cost of delivering your product, and works down through operating expenses to net income, the bottom line.

  • Revenue — what you earned from customers.
  • Gross profit — revenue minus direct costs.
  • Operating income — gross profit minus running costs.
  • Net income — what is left after interest and tax.

The balance sheet

If the income statement is a video of a period, the balance sheet is a photograph of a single moment. It lists what the business owns, owes, and the difference, equity. The identity never breaks: assets equal liabilities plus equity.

A profitable company can still run out of cash. The balance sheet and cash flow statement are how you catch it early.

The cash flow statement

Profit is an opinion; cash is a fact. The cash flow statement tracks actual cash through operating, investing, and financing activities, and explains how a business can show profit yet struggle to make payroll.

How the three statements connect

They are one model viewed three ways. Net income flows into equity and sits atop the cash flow statement. Changes in receivables and payables drive operating cash flow. Get one number wrong and all three move.

What this means for FP&A

Good FP&A projects all three statements together, so a change in assumptions shows up in profit, cash, and the balance sheet at once. That is the difference between a spreadsheet of guesses and a model you can plan against, exactly the connective work Reportly AI automates.