chapter 11
Profits and balance sheets
You have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization.
Charlie Munger
There are more fun ways of spending time than reading a set of accounts (and the report that goes with them), but it is a necessary task for an investor. They are a primary source of information helping you analyse a company. So this is a topic you are going to have to get to grips with at some point.
The key elements of accounting are simple and it’s not necessary for you to deal with the more complex and obscure accounting issues in order to understand the profit performance of a business or the value of the firm’s assets. In this chapter, I’ll illustrate ...
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