Meaning of the P&L and of the Balance Sheet: Madera Inc.

12 Pages Posted: 22 Oct 2015 Last revised: 2 Jun 2019

See all articles by Pablo Fernandez

Pablo Fernandez

University of Navarra - IESE Business School

Isabel Fernández Acín

University of Navarra - University of Navarra, Students

Alberto Ortiz Pizarro

University of Navarra, IESE Business School

Date Written: May 27, 2019

Abstract

The income statement and balance sheet of Madera Inc are presented and the meaning of each account is explained in the simplest possible way. The following questions arise: What is the net income? Is it what the shareholders “earn”, what the company “earns”, what someone “earns”? What does shareholders' equity mean? Is it money? The income statement and the balance sheet are also compared with the annual accounts that are used by most families.

This document is the reading of the first class of our course Financial Management.

The Spanish version of this paper is available at http://ssrn.com/abstract=2441875.

Keywords: net income, equity, book value of equity, money, dictionary

JEL Classification: G12, G31, M21

Suggested Citation

Fernandez, Pablo and Fernández Acín, Isabel and Ortiz Pizarro, Alberto, Meaning of the P&L and of the Balance Sheet: Madera Inc. (May 27, 2019). Available at SSRN: https://ssrn.com/abstract=2671748 or http://dx.doi.org/10.2139/ssrn.2671748

Pablo Fernandez (Contact Author)

University of Navarra - IESE Business School ( email )

Camino del Cerro del Aguila 3
28023 Madrid
Spain
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)

HOME PAGE: http://web.iese.edu/PabloFernandez/

Isabel Fernández Acín

University of Navarra - University of Navarra, Students ( email )

Pamplona
Spain

Alberto Ortiz Pizarro

University of Navarra, IESE Business School ( email )

Camino del Cerro del Águila, 3
Madrid, 28023
Spain

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