7.1. Reading Statements with a Touch of Skepticism
Suppose that you have the opportunity and the ready cash to buy a going business. The business I have in mind is the very one I use as the example in the previous three chapters in which I explain the income statement (Chapter 4), the balance sheet (Chapter 5), and the statement of cash flows (Chapter 6). Of course, you should consider many factors in deciding your offering price. The company's most recent financial statements would be your main source of information in reaching a decision — not the only source, of course, but the most important source for financial information about the business.
7.1.1. Recognizing a business's bias
Some people put a great deal of faith in numbers: 2 + 2 = 4, and that's the end of the story. When they see a dollar amount reported to ...