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CHAPTER 9: Fundamental Analysis > The Balance Sheet and the Income Statement

The Balance Sheet and the Income Statement

This section is designed to teach you some basic methods for analyzing both the balance sheet and the income statement. Analyzing both statements is an important tool to help investors appraise their investment options.

Balance Sheet Analysis

The analysis of a balance sheet is done to identify potential liquidity problems. These may signify the company's inability to meet financial obligations. An investor also can examine the degree to which a company is leveraged, or indebted. An overly leveraged company may have difficulties raising future capital. Even more severe, they may be headed towards bankruptcy. These are just a few of the danger signs that can be detected with careful analysis of a balance sheet.


  

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