Consequently, the liquidity ratios, the profitability ratios, and the solvency ratios can be used for wage negotiations, takeovers and mergers, and private share purchases (Keown, Petty, Scott, and Martin, 1998; Hunt, Weygandt, Kieso, and Kimmel, 2003).
Financial Documents
Income 1. 2. ↓ |
Expense 1. 2. ↓ |
Assets 1. 2. ↓ | Liabilities 1. 2. ↓ |
Consequently, decision-making capability requires the precise examination and understanding of these two documents, as exemplified above, which will likewise allow recognition of contracts, trends, requirements of the consumers and vendors, and especially the route that the money is streaming(Pratt, 2003; Albrecht et al, 2002 Kiyosaki and Lechter, 2002). In this regard, Warren Buffet, a business tycoon who went up the ladder of riches through appropriate investments in America, Alan Greenspan, the then chairman of the Federal Reserve Board for almost 20 years, Paul O’Neill, who was a secretary of the treasury for sometime, all basically supposed the need for everyone to learn reading and writing financial statements (Kiyosaki and Lechter, 2002).
According to Kiyosaki and Lechter in 2002, “It is the direction of the cash flow in a financial statement that counts and not the glittery fool’s gold”.
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