This chapter delves more deeply into two topics introduced in Chapter 1: financial statements and cash flow concepts. We also discuss some important tax considerations. You should understand that financial statements are a key source of information for financial decisions; thus, the chapter emphasizes the use, rather than the preparation of financial statements. Throughout this chapter, two important distinctions must be kept in mind: (1) the difference between accounting value and market value; and (2) the difference between accounting income and cash flow. These concepts are essential to an understanding of corporate finance.