CHAPTER 2

Corporate Financial Statements

Four general purpose financial statements issued by publicly owned corporations were identified in Chapter 1: The balance sheet, income statement, statement of cash flows, and statement of retained earnings. This chapter revisits these publicly available reports in greater detail.

The Balance Sheet

The balance sheet is a snapshot of a corporation’s financial position at a specific point in time. In fact, balance sheets are often referred to as statements of financial position. A corporation’s financial position refers to its assets and the claims to those assets by creditors and shareholders. A balance sheet is aptly named, because the relationship among its elements can be expressed as a rudimentary formula ...

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