Financial Family Tree

FIG. 9-2 Financial family tree. Source Adapted from Couper, 2003.)... 

For a broader perspective. Figure 3.3, the financial family tree, ties together the income statement and the balance sheet. The upper part of the figure includes information obtained from the income statement, while the lower part contains information from the balance sheet, namely, total assets and total liabilities. The difference between these two figures is the stockholders equity from which the return on equity can be calculated. The net income found in the income statement divided by the stockholders equity is the return on equity. Figures 3.2 and 3.3, therefore, depict how the income statement and the balance sheet are related. 

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