Interpretation of Financial Statements
Financial statements highlight more about a company than what it earned, what it owes, and the historical value of its assets. Thus to demonstrate the economics of a company, you need to study and deeply analyze its financial statements.
It is important to note that no individual figures on a financial statement are useful in isolation. Let us assume that Company A1’s income statement indicates a net income of $100,000 and Company B2’s a net income of $300,000. It is apparent that Company B2 made twice the profit of Company A1.
However, does that really mean that Company B2 is twice as profitable? Is it operated more efficiently? Would you want to invest in Company B2 rather than Company A1? What ...
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