Chapter 3

Analyzing Financial Statements

IN THIS CHAPTER

Bullet Evaluating a business’s financial health

Bullet Categorizing business transactions

Bullet Connecting revenue and expenses with assets and liabilities

Bullet Focusing on profitability and activity measures

Bullet Assessing quality of profits

Bullet 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 chief executive officer and other executives, managers, employees, and even vendors.

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

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