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Preface to the Second Edition - Pg. 1

Twelve Basic Principles Preface If the rst edition of this book was an entrepreneurial business, it would be a huge success. Now over 100,000 copies of Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports are in-press and helping non-nancial managers and students of accounting and nance cope with the "numbers of business." With this new revised second edition, we have expanded the book into ve sections from the original three. Many readers of the rst edition wanted to better under- stand capital investment decision-making, which is the focus of our two new sections. Capital is often a company's scarcest resource, and using capital wisely is essen- tial for success. The chief determinant of what a company will become is the capital investments it makes today. So in this new edition, we will use the nancial analysis Knowing a little accounting and nancial reporting can be very, very satisfying. Yes, it does all come out right at the end, and there is real beauty and poetry in its structure. But let's discuss perhaps the real rea- son you've bought and are now reading this book. My bet is that it has to do with power. You want the power you see associ- ated with knowing how numbers ow in business. Be it poetry or power, this accounting and nancial reporting stuff is not rocket science. You've learned all the math re- quired to master accounting by the end of the fourth grade--mostly addition and subtraction with a bit of multiplication and division thrown in to keep it lively. The specialized vocabulary, on the other hand, can be confusing. You will