Meaning of the P&L and of the Balance Sheet: Madera Inc.
12 Pages Posted: 22 Oct 2015 Last revised: 2 Jun 2019
Date Written: May 27, 2019
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: Suggested Citation