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Understanding Financial Accounts

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Understanding Financial Accounts seeks to show how a range of questions on financial developments can be answered with the framework of financial accounts and balance sheets, by providing non-technical explanations illustrated with practical examples: What are the basic principles, concepts and definitions used for this framework which is part of the system of national accounts? What sources and which methodologies are used for their compilation? How are these used to monitor and analyse economic and financial developments? What can we learn about the 2007-2009 economic and financial crisis when looking at the numbers provided in this framework? What can we learn about financial risks and vulnerabilities? This publication is intended for young statisticians, students, journalists, economists, policy makers and citizens, who want to know more about the statistics that are at the heart of the analysis of financial developments in OECD economies.

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The financing of non-financial corporations

Non-financial corporations are responsible for a large share of the economic activity in most advanced economies. They produce goods and services, they invest, and they employ a large share of a country’s labour force. Their importance in the “real” economy is evident in nearly every economic activity. This chapter focuses on non-financial corporations’ interactions within the financial system, both as borrowers and as lenders. Their investments of available funds across instruments may provide important insights into their investment strategies and their propensity towards risk. Conversely, different sources of funding for non-financial corporations shed light on their key choices, such as the choice of debt or equity or the mix of long versus short-term debt. This chapter further provides insights on non-financial corporations’ balance sheets, and on the indicators that can be derived from them. It also addresses key conceptual and operational issues, such as the differences between the System of National Accounts (SNA) and corporate or business accounting.

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