how might a review of financial statements help managers diagnose other kinds of performance problems as well?

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Looking at financial statements is a way of figuring out which aspects of a business are profitable and which are not. Financial statements are the proverbial "bottom line," and if businesses are losing money, something needs to be done. They do not always indicate what choices need to be made, but certainly which operations, departments, products, etc. need attention.

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If a manager looks closely at financial statements, he or she might be able to determine what sorts of problems the firm has.  The manager can look at the statements to see which parts of the operation are making money and which are not.  This might tell them which parts of the operation are working efficiently.

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