Appendix A

Understanding Financial Statements

What does your company own, and what does it owe to others? What are its sources of revenue, and how has it spent its money? How much profit has it made? What is the state of your company’s financial health? This appendix helps you answer those questions by explaining the three essential financial statements: the balance sheet, the income statement, and the cash-flow statement. The appendix also helps you understand some of the managerial issues implicit in these statements and broadens your financial know-how through a discussion of two important concepts: financial leverage and the financial structure ...

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