The following is an excerpt from my book “Return to Capitalism” —
“A construct developed over the years that has proven useful in evaluating business’s health and prospects is the balance sheet and income statement. The balance sheet is a listing of assets and liabilities with the difference being the net worth, equity, or book value. This is always at a point in time. Complementing the balance sheet is the income statement of revenue and expenses with the difference being the net income. This is always for one period of time. Unspent income that accumulates from one time period to another gets added to the assets (or deficits to debt). The same format works well for individuals in studying their financial well-being, from trouble with excessive debt that threatens bankruptcy, to being wealthy.”
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