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You don’t have to be an engineer to drive a car!

Neither do you have to be an accountant to read a financial statement!

Numerous MBA students at different points in their MBA programs have told us that they really don’t know what to make of a company’s financial statement when they are presented with one. They have told us that they just stare at a financial statement not knowing where to start, what to “read” or what to make of it!

Reading a Financial Statement

So, we at GraduateTutor.com have compiled a reckoner that will help students at different levels of understanding “read” a financial statement so that they can make sense out of it. We want students to be able to read a company’s financial statement and to understand what is really going on with the financial health of that company. We would like students to be able to answer the following questions on the company based on a review of its financial statements:

How profitable is this company?
Is this company financially healthy?
What are the earnings attributable to each shareholder?
What are the assets of the company as on the balance sheet date?
What are the liabilities of this company as on the balance sheet date?
How much money did the shareholders invest in the company?
How much money did the company generate for the shareholders?
What is this company’s net worth?
Did the company generate cash during the period?
How much money did the company generate from its operations?
How much money did the company invest in its business?
Did the company sell any assets?
How much money did the company pay its shareholders and lenders?
Did the company raise money from its shareholders and lenders?
How is this company different from other companies or its competitors?
Has the company’s financial performance been improving or declining? What is possibly causing the improvement or decline?
Is the company’s strategy working?

Time Constraints

We also know that you have a limited amount of time! We have avoided going into accounting technicalities. Our aim is to enable you to look at the financial statements of a company and understand what is going on in the company from a financial perspective. We hope you will be able to answer the above questions about the company.

We have enjoyed bringing this book out for our students. We hope you will find this very useful, practical and educational.

Best regards,

The team @ Graduatetutor.com

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