Understanding Financial Statements

Cover
Title Page
Copyright Page
ACKNOWLEDGMENTS
ABOUT THE AUTHORS
Contents
Preface to the Eleventh Edition
Organization of the Eleventh Edition
Uses for the Eleventh Edition
Acknowledgments
About the Authors
CHAPTER 1 Financial Statements: An Overview
	Map or Maze
		Usefulness
		Volume of Information
		Global Economy
		Where to Find a Company’s Financial Statements
		The Financial Statements
		Notes to the Financial Statements
		Auditor’s Report
		Financial Reporting Reforms
		Management Discussion and Analysis
		Five-Year Summary of Selected Financial Data and Market Data
		Pandora (a.k.a. “PR Fluff”)
		Proxy Statement
		Missing and Hard-to-Find Information
		Characteristics, Assumptions, Principles and Basis of Accounting
	Complexities and the Quality of Financial Reporting
		Accounting Choices
		Timing of Revenue and Expense Recognition
		Discretionary Items
	The Journey Through the Maze Continues
APPENDIX 1A: Sage Inc
	Self-Test
	Study Questions and Problems
	Case 1.1 Intel Case
	Case 1.2 Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template
	Case 1.3 Mattel Inc
	Case 1.4 Biolase, Inc
CHAPTER 2 The Balance Sheet
	Financial Condition
		Consolidation
		Balance Sheet Date
		Comparative Data
		Balance Sheet Format
		Common-Size Balance Sheet
	Assets
		Current Assets
		Cash and Cash Equivalents
		Marketable Securities
		Accounts Receivable
		Inventories
		Inventory Accounting Methods
		Prepaid Expenses
		Property, Plant, and Equipment
		Straight line
		Accelerated
		Goodwill
		Other Assets
	Liabilities
		Current Liabilities
		Accounts Payable
		Short-Term Debt
		Current Maturities of Long-Term Debt
		Accrued Liabilities
		Unearned Revenue or Deferred Credits
		Deferred Federal Income Taxes
		Long-Term Debt
		Capital Lease Obligations
		Pensions and Postretirement Benefits
		Commitments and Contingencies
	Stockholders’ Equity
		Common Stock
		Additional Paid-In Capital
		Retained Earnings
		Other Equity Accounts
	Quality of Financial Reporting—The Balance Sheet
	Other Balance Sheet Items
	Self-Test
	Study Questions and Problems
	Case 2.1 Intel Case
	Case 2.2 Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template
	Case 2.3 Walgreen Co. and Subsidiaries
	Case 2.4 Hydrogenics Corporation
CHAPTER 3 Income Statement and Statement of Stockholders’ Equity
	The Income Statement
		Common-Size Income Statement
		Net Sales
		Cost of Goods Sold
		Gross Profit
		Operating Expense
		Operating Profit
		Other Income (Expense)
		Equity Earnings
		Earnings Before Income Taxes/Effective Tax Rate
		Special Items
		Net Earnings
		Earnings per Common Share
		Comprehensive Income
	The Statement of Stockholders’ Equity
	Earnings Quality, Cash Flow, and Segmental Accounting
APPENDIX 3A: A Guide to Earnings Quality
	Self-Test
	Study Questions and Problems
	Case 3.1 Intel Case
	Case 3.2 Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template
	Case 3.3 Logitech International S.A
	Case 3.4 Hydrogenics Corporation
CHAPTER 4 Statement of Cash Flows
	Why Cash Flow is Important: An Example
	Statement of Cash Flows: Basic Principle
	Preparing a Statement of Cash Flows
	Calculating Cash Flow from Operating Activities
		Indirect Method
	Cash Flow from Investing Activities
	Cash Flow from Financing Activities
	Change in Cash
	Analyzing the Statement of Cash Flows
		Cash Flow from Operations
		Nocash Corporation
	Sage Inc.: Analysis of the Statement of Cash Flows
		Sage Inc. Analysis: Cash Flow from Operating Activities
		Summary Analysis of the Statement of Cash Flows
		Analysis of Cash Inflows
		Analysis of Cash Outflows
	Qualitative Issues Relating to the Statement of Cash Flows
	Are We There Yet?
APPENDIX 4A: Statement of Cash Flows—Direct Method
	Self-Test
	Study Questions and Problems
	Case 4.1 Intel Case
	Case 4.2 Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template
	Case 4.3 Avnet Inc
	Case 4.4 Hydrogenics Corporation
CHAPTER 5 The Analysis of Financial Statements
	Objectives of Analysis
	Sources of Information
		Proxy Statement
		Auditor’s Report
		Management Discussion and Analysis
		Supplementary Schedules
		Form 10-K and Form 10-Q
		Other Sources
	Tools and Techniques
		Common-Size Financial Statements
		Key Financial Ratios
		Liquidity Ratios: Short-Term Solvency
		Cash Conversion Cycle or Net Trade Cycle
		Activity Ratios: Asset Liquidity, Asset Management Efficiency
		Leverage Ratios: Debt Financing and Coverage
		Profitability Ratios: Overall Efficiency and Performance
		Market Ratios
	Analyzing the Data
		Background: Economy, Industry, and Firm
		Short-Term Liquidity
		Operating Efficiency
		Capital Structure and Long-Term Solvency
		Profitability
		Relating the Ratios—The Du Pont System
		Projections and Pro Forma Statements
		Summary of Analysis
		Financial Statements: A Map
APPENDIX 5A: The Analysis of Segmental Data
	Self-Test
	Study Questions and Problems
	Case 5.1 Intel Case
	Case 5.2  Applied Materials Comprehensive Analysis Case Using the Financial Statement Analysis Template
	Case 5.3 Facebook, Inc
	Case 5.4 Hydrogenics Corporation
APPENDIXES
	A: Summary of Financial Ratios
	B: Solutions to Self-Tests
	C: Glossary
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Index
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