Understanding the Financial Condition of a Firm
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Where should one begin when seeking to understand the financial condition of a firm?
Please provide a detailed explanation and examples.
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The solution helps understand the financial condition of a firm.
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The first place that one should go when seeking to understand the financial condition of a firm is the firm's financial statements. If the firm is a public company then that is even better because it is likely to be audited by an accounting firm that acts as an independent third party. They ensure that what the firm reports in its financial statements is true and free of misleading information. Moreover, if the company is public, they will have to live under the standards set forth by oversight bodies like the Securities and Exchange Commission and the Ontario Securities Commission. These standards have been put in place over the years to force firms to disclose certain amounts of information about their firm with the goal of protecting the investor and the ...
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