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How to Read and Interpret Financial Statements by Michael P. Griffen

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7

Balance Sheet Analysis

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Learning Objectives

By the end of this chapter, you should be able to:

• List the liquidity, activity, and leverage ratios used to analyze a balance sheet.

• Explain the purpose of horizontal and vertical analysis.

INTRODUCTION

The prior chapters have presented background on the preparation of financial statements, their components, and the efforts of the accounting profession to provide consistent financial statements that are materially correct. The assurance that we have financial statements that present each balance in a consistent manner from year to year allows us to analyze financial statements on a comparative ...

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