The three statements
Every business keeps score with three reports. Together they answer: did it make money, where did the cash go, and what does it own and owe?
Three questions
The income statement asks: did the business make a profit over a period, like a year? The cash flow statement asks: where did the actual cash come from and go? The balance sheet asks: what does it own and owe on one day?
A café, for every book on this shelf
Picture a café. It sells coffee and cake, pays rent and staff, and once bought an oven. We follow the same café through all three reports.
Why three
One report hides what another shows. The café can make a profit and still run out of cash, because a big customer pays late, or because it bought a new oven this year. Reading the three together tells the real story.
Why it matters to you
Your own money works the same way. Portfolio keeps your net worth (a balance sheet), what came in and went out (an income statement) and the calendar of money moving (a cash flow).