We start the chapter by presenting a basic framework of corporate finance. Next, we provide an introduction to the main financial reports: the balance sheet and the income statement. We describe both the primary individual characteristics of each financial report and the interaction between the two statements. This interaction is important as it allows one to get a more complete picture of a company's financial situation and business performance. Finally, we provide some basic measures of return. As a necessary complement, we also introduce the concepts of expected return and cost of capital.
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