Chapter $10-$ Budgeting On page $497$ is Key equation: $$ Opening inventory $+$ Purchases $-$ Cost of Good Used $=$ Ending Inventory Just as every medical case is different, but is similar, every set of financial statements are different, but are similar. Remember that financial statements do not stand in isolation. If you don't like the way numbers are presented, rearrange the numbers to your liking and understanding. For our purposes, I suggest changing the equation to plug into our secret sauce matrix learned earlier. Equivalent Key Equation: $$ Opening Inventory $-$ Cost of Goods Used $+$ Purchases $=$ Ending Inventory This gives us a reason to expand the 'secret sauce' with new vertical and horizontal calculations: Let's assume a For$-$Profit company and add the following: $1)$ Property, Plant, and Equipment $($PPE$)$ to the balance sheet, $2)$ Depreciation to the Income statement $3)$ Inventory to the Balance Sheet $4)$ Cost of Goods $($COG$)$ used or sold to the Income Statement $5)$ Inventory Purchase $($Inv$.$ Purch.$)$ to the direct Cash Statement $6)$ Tax to considerations to the Balance Sheets, Income and Cash Flow Statements $7)$ Distributions to the Cash Flow Statement $$Resulting in horizontal calculations of : Bal Sheet $$ Income $$ Cash $$End Bal Sheet $------------------------------------------------------------------$ Cash $+$ Net Cash $=$ Cash$$ AR $+$ Charges $-$ Collections $=$ AR Inventory $-$ COG $+$ Inv. Purch. $=$ Inventory PPE $-$ Depreciation $=$ PPE AP $+$ Expense $-$ Exp Paid $=$ AP$$ Tax $+$ Tax Due $-$ Tax Paid $=$ Tax RE $+$ Net Profit $-$ Distributions $=$ RE $$ And vertical calculations of: Charges $-$ COG $-$ Depreciation $-$ Expenses $-$ Tax Due $=$ Net Profit. Collections $-$ Inv. Purchases $-$ Exp Paid $-$ Tax Paid $-$ Distributions $=$ Net Cash Question $1$: what are the effects of increased COG on the Income Statement, Cash Flow and ending Balance Sheet, all other things being equal? Do one $(1)$ vertical and two $(2)$ horizontal calculations in order, if you need:$$ Question $2$: What are the effects of additional Inventory Purchases on the Income Statement, Cash Flow Statement and ending Balance Sheet, all other things being equal? Do one $(1)$ vertical and two $(2)$ horizontal calculations in order, if you need: