How Finance Works

 

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Financial Analysis

Using ratios to analyze performance—all while playing a game

To help you develop financial intuitions, we’re going to play a little game. This game will introduce the world of finance by creating an understanding of how to use numbers to evaluate performance—the critical process of financial analysis. Financial analysis answers some of the most fundamental questions that financial professionals—from CFOs and managers to investors and bankers—need to answer, questions that go to the root of a company’s performance, viability, and potential.

Financial analysis is much more than accounting. In this chapter, we won’t go through the mechanics of accounting (e.g., debits and credits) but rather develop intuition around financial ...