Chapter Summaries
3.1 Describe the content of the four basic financial statements and discuss the importance of financial statement analysis to the financial manager. (pgs. 40–42)
Summary:
The accounting and financial regulatory authorities have mandated that firms provide four different financial statements, with each having its own perspective and objective:
Income statement —includes the revenues the firm has earned, the expenses it has incurred to earn those revenues, and the profit the firm has earned over a specific period of time, usually a quarter of a year or a full year.
Balance sheet —contains information about the firm’s assets (everything of value the company owns), liabilities (the company’s debts), and stockholders’ equity (the ...
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