Analyzing a Products-Based Firm’s Financial Statements

In this chapter we pick up firms that deal in tangible goods, either as manufacturer-sellers or as traders. They could be business-to-business (B2B) or business-to-customer (B2C) firms. Before we begin, we need to understand what is unique or different about these firms as compared to firms dealing in services. In fact, this is the first step in any financial analysis—to understand the business of the firm from their financial statements and other information available.

Differences in Financials of Goods- and Services-Based Firms

Take a look at the common-size statements of two firms in Tables 3.1 to 3.3. Can you identify the firm dealing in goods and the one dealing in services? ...

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