Financial Management: Principles and Applications, 13/e

3.1 An Overview of the Firm’s Financial Statements

In Chapter 2, we looked at the world of business through the eyes of an investor using security prices from financial markets. In this chapter, we look at the firm from the perspective of the financial analyst by reviewing the firm’s financial statements, including the income statement, balance sheet, and cash flow statement. Understanding the financial health of a business by reviewing its financial statements is also important to the financial manager, whose goal is to determine how to increase the value of the firm.

Basic Financial Statements

The accounting and financial regulatory authorities mandate that firms provide the following four types of financial statements:

1. Income statement— ...