1. The book values on an accounting balance sheet can be very different from market values. The goal of financial management is to maximize the market value of the stock, not its book value.
2. Net income as it is computed on the income statement is not cash flow. A primary reason is that depreciation, a noncash expense, is deducted when net income is computed.
3. Marginal and average tax rates can be different, and it is the marginal tax rate that is relevant for most financial decisions.
4. The marginal tax rate paid by the corporations with the largest incomes is 35 percent.
5. There is a cash flow identity much like the balance sheet identity. It says that cash flow from assets equals cash flow to creditors and stockholders.

The calculation of cash flow from financial statements isn't difficult. Care must be taken in handling noncash expenses, such as depreciation, and not to confuse operating costs with financing costs. Most of all, it is important not to confuse book values with market values, or accounting income with cash flow.