UNDERSTANDING A COMPANY'S FINANCES: A Graphic Approach by

UNDERSTANDING A COMPANY'S FINANCES: A Graphic Approach

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KIRKUS REVIEW

In theory, the use of schematics to diagram the flow of funds into, through, and out of a business should give a good idea of just how, for example, the entries on an income statement relate to those of a balance sheet. In practice, however, Purcell's 50-odd line drawings--chock-full of rectangular, cylindrical, and elliptic devices linked by solid, dashed, and dotted arrows--are more baffling than revealing. Beyond the problem of visual clutter, Purcell's nomenclature--tanks, pumps, meters, and pipes--causes other difficulties. In describing equity's position on the balance sheet, he states: ""In the same column, below the liability meters [representing, among other things, accounts receivable], there is one more meter keeping track of what the company 'sort of' owes to the stockholders who financed and own the company."" Using his alphanumeric display as a constant reference point, Purcell reviews the individual parts comprising the financial whole of the apocryphal Pump & Paddle Co. He does so, however, in terms so lingo-free that they bear little resemblance to the language of the marketplace--e.g., equipment, as opposed to plant account--and without much regard for either fundamental analytic techniques or generally accepted accounting principles. Ultimately, he offers evaluations of the model corporation's financial results, position, and prospects under a variety of circumstances--for instance, differing dividend-disbursement plans, stepped-up capital investment, or supply-side strikes. The textual material, originally developed for chalk-talk seminars, may lose a good deal in the translation from classroom notes to print. In any case, disclosure documents are appreciably more complex than Purcell's analogue approach suggests. Tyros can secure a working knowledge of the money game from Herbert Spiro's Finance for the Nonfinancial Manager (1977), while semi-pros and sophisticates can profit from Abraham Briloff's The Truth About Corporate Accounting (1980).

Pub Date: Sept. 14th, 1981
Publisher: Houghton Mifflin