Chapter 1
Introducing Financial Statements
IN THIS CHAPTER
Identifying the information components in financial statements
Evaluating profit performance and financial condition
Knowing the limits of financial statements
Recognizing the sources of accounting standards
In this chapter, you get interesting tidbits about the three primary business financial statements, or financials, as they’re sometimes called: the income statement, the balance sheet, and the statement of cash flows.
For each financial statement, we introduce its basic information components. The purpose of financial statements is to communicate information that is useful to the readers of the financial statements, to those who are entitled to the information. Financial statement readers include the managers of the business and its lenders and investors. These constitute the primary audience for financial statements. (Beyond this primary audience, others are also interested in a business’s financial statements, such as its labor union or someone considering buying the business.) Think of yourself as a shareholder in ...
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