Chapter 3
Analyzing Financial Statements
IN THIS CHAPTER
Evaluating a business’s financial health
Categorizing business transactions
Connecting revenue and expenses with assets and liabilities
Focusing on profitability and activity measures
Preparing vertical and horizontal analyses
Stakeholders in a business are naturally curious about the financial condition of a company, as reported in its financial statements. Stakeholders include everyone who may be affected by the financial success or failure of the business — owners, investors, lenders, the CEO and other executives, managers, employees, and even vendors.
This chapter offers practical tips to help investors, lenders, or anyone who has a financial stake in a business glean important insights from financial statements. These tips also help anyone else with an interest in the financial condition of a business.
Judging Solvency and Liquidity
Solvency and liquidity both measure the ability of an entity to pay its debts. Solvency ...
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