Finance for Nonfinancial Managers, Second Edition (Briefcase Books Series), 2nd Edition

The Structure and Interrelationship of Financial Statements

Every corporation has, from the moment it’s formed, an indefinite life under the law. The corporate laws of every state grant a corporation the right to perpetual existence to enable management to take strategic actions that will have a long-term impact on the company’s survival and growth. These include making long-term contracts and issuing certificates of ownership (stock) that don’t expire.

  But perpetual existence is only a legal concept. In reality, most companies follow a pattern of birth, rapid growth, slowing growth, plateau or no growth, decline, and demise (Figure 2-1). That ...