Chapter 3

Analyzing Financial Statements

In This Chapter

arrow Evaluating a business's financial health

arrow Categorizing business transactions

arrow Connecting revenue and expenses with their assets and liabilities

arrow Focusing on profitability and activity measures

arrow Preparing vertical and horizontal analyses

Stakeholders in a business are naturally curious about the financial condition of a company, as reported in its financial statements. Stakeholders include everyone who may be affected by the financial success or failure of the business — owners, investors, lenders, the CEO and other executives, managers, employees, and even vendors.

This chapter offers practical tips to help investors, lenders, or anyone who has a financial stake in a business glean important insights from financial statements. These tips also help anyone else with an interest in the financial condition of a business.

Judging Solvency and Liquidity

Solvency and liquidity both measure the ability of an entity to pay its debts. Solvency ...

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