This weeks is about three common financial statements, namely the balance sheet, income statement, and statement of cash flows. The basis of accounting for these statements for most non-governmental for-profit entities is known as Generally Accepted Accounting Principles (GAAP). One of the underlying principles of GAAP is that items on the balance sheet are listed at Book Value as opposed to Market Value. What are Book Value and Market Value? Under what circumstances could they be the same and under what circumstances could they be different? Is one measure more important than the other? Why do you believe that the developers of GAAP proposed that Book Value govern balance sheet reporting? Net income differs from cash received which is why the statement of cash flows is required to bridge the two. What are the principal differences between net income and cash flow? Cash is obviously important but why might both measures be important for a financial manager?

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