2. The Income Statement: Do We Care About More Than the Bottom Line?

Suppose you resign from your corporate HR position and use your life savings, say $1,000,000, to start your own headhunting firm. One year later, what are the financial questions that you will be asking? Perhaps number one on your list will be, “Did your firm make a profit?” In addition to profitability you will want to know about the financial condition of your business, that is, “Will your firm have the financial strength to ride out difficult economic conditions should you encounter them?” Or on the flipside, “Will your firm have the financial strength to take advantage of any attractive expansion opportunities?” A third question you will no doubt ask is, “What rate of return ...

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