Chapter 7

Making Sense of Financial Statements

In This Chapter

arrow Spotting interesting trends in the income statement

arrow Kicking the tires of companies by analyzing the balance sheet

arrow Appreciating the importance of tracking cash flow

arrow Finding the lurid details about a company buried in the proxy statement

When you go to the doctor, you end up sharing parts of your body or personal concerns you don't normally divulge to just anyone. It's the professional relationship you have with your doctor that makes you feel free to open the kimono, literally and figuratively.

A similar situation exists between investment banks and their clients. Companies commonly share detailed aspects of their business with close financial advisors. It's part of the relationship between investment banks and companies, and a big reason why the industry is so closely regulated — that information has great value.

But even though companies often share privileged information with investment bankers, investment bankers must do their part to research a company in order to understand it better. And when it comes to getting ...

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