Harvard Business Review Guides Ultimate Boxed Set (16 Books)

Section 3

The Limits of Financial Data

This part of the HBR Guide to Finance Basics for Managers is a little different from the rest. In the earlier sections you learned the fundamentals. In this one you’ll get some advice about how to evaluate what you know, how to use it most effectively, and how to supplement it with other kinds of information.

Why are such cautions necessary? Mainly because we tend to put too much faith in numbers. The income statement and balance sheet may seem precise, but they aren’t. They reflect all sorts of assumptions, estimates, and procedural decisions, such as which depreciation method to use. Moreover, there is much about a business that the numbers—even the truly precise ones on the cash flow statement—can’t capture. ...