Understanding Financial Statements GLOBAL 11th Edition by Lyn M. Fraser, ISBN-13: 978-1292101552
[PDF eBook eTextbook]
- Publisher: ? Pearson International; 11th edition (January 1, 2016)
- Language: ? English
- 304 pages
- ISBN-10: ? 1292101555
- ISBN-13: ? 978-1292101552
An Analytical Approach to Understanding and Interpreting Business Financial Statements.
Understanding Financial Statements improves the student’s ability to translate a financial statement into a meaningful map for business decisions. The material covered in each chapter helps students approach financial statements with enhanced confidence and understanding of a firm’s historical, current, and prospective financial condition and performance. The Eleventh Edition includes new case studies based on existing companies and enhanced learning tools to help students quickly grasp and apply the materials. Fraser and Ormiston presents material in an engaging fashion that helps readers make sense of complex financial information, leading to intelligent (and profitable!) decision-making.
Table of Contents:
UNDERSTANDING FINANCIAL STATEMENTS
Contents
Preface to the Eleventh Edition
New to this Edition
Organization of the Eleventh Edition
Uses for the Eleventh Edition
About the Authors
Chapter 1 Financial Statements An Overview
Learning Objectives
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net Sales
Gross Profit
Operating Expenses
Other Income (Expense)
Income Tax
Liquidity and Capital Resources
Operating Activities
Investing Activities
Financing Activities
Auditor’s Report
Note 1—Basis of Presentation and Summary of Significant Accounting Policies
Note 2—Debt
Note 3—Commitments
Note 4—Income Taxes
Note 5—Contingencies
Note 6—Segment Information
S elf-T est
S tudy Q uestions and P roblems
Chapter 2 The Balance Sheet
Learning Objectives
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
Accelerated5
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
Chapter 3 Income Statement and Statement of Stockholders’ Equity
Learning Objectives
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
Using the Checklist
I. Sales or Revenues
1. Premature Revenue Recognition
2. Allowance for Doubtful Accounts
3. Price Versus Volume Changes
4. Real Versus Nominal Growth
II. Cost of Goods Sold
5. Cost Flow Assumption for Inventory
6. Base LIFO Layer Liquidations
7. Loss Recognitions on Write-Downs of Inventories
III. Operating Expenses
8. Discretionary Expenses
9. Depreciation
10. Asset Impairment
11. Reserves
12. In-Process Research and Development
IV. Nonoperating Revenue and Expense
13. Gains (Losses) from Sales of Assets
14. Interest Income
15. Equity Income
16. Income Taxes
17. Discontinued Operations
18. Extraordinary Items
V. Other Issues
19. Material Changes in Number of Shares Outstanding
20. Operating Earnings, a.k.a. Core Earnings, Pro Forma Earnings, or EBITDA
What Are the Real Earnings?
S elf-T est
S tudy Q uestions and P roblems
Chapter 4 Statement of Cash Flows
Learning Objectives
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
Direct Method
S elf-T est
S tudy Q uestions and P roblems
Chapter 5 The Analysis of Financial Statements
Learning Objectives
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
Strengths
Weaknesses
Financial Statements: A Map
Appendix 5A: The Analysis of Segmental Data
Analyzing Segmental Data: An Illustration
Summary
Operating Segment—Definition
Disclosure Requirements
S elf-T est
S tudy Q uestions and P roblems
Appendix A Summary of Financial Ratios
Appendix B Solutions to Self-Tests
Appendix C Glossary
Index
Lyn M. Fraser has taught undergraduate and graduate classes in financial statement analysis at Texas A&M University and has conducted numerous seminars on the subject for executive development and continuing education courses. A Certified Public Accountant, she is the co-author with Aileen Ormiston of Understanding the Corporate Annual Report: Nuts, Bolts, and a Few Loose Screws (Prentice Hall, 2003) and has published articles in the Journal of Accountancy, the Journal of Commercial Bank Lending, the Magazine of Bank Administration, and the Journal of Business Strategies. She has been recognized for Distinguished Achievement in Teaching by the Former Students Association at Texas A&M University and is a member of Phi Beta Kappa. Lyn’s most recent publication is a new mystery novel, “Debits and Credits”, published by Mainly Murder Press in 2014.
Aileen Ormiston teaches in the Accounting Department in the W.P. Carey School of Business at Arizona State University and has taught in the MBA, honors, and online programs. She received her bachelor’s degree in accounting from Michigan State University and a master’s degree in finance from Texas A&M University. Prior to embarking on her teaching career, Aileen worked in cost accounting and also as an auditor in public accounting. She taught accounting and general business courses for 30 years at Mesa Community College, one of 13 universities and colleges that received a grant from the Accounting Education Change Commission. As a result of her pioneering work in changing accounting education, she was the recipient of the “Innovator of the Year” award from the League for Innovation in the Community College. For her service to honors students, Aileen has been named a Phi Theta Kappa mentor.
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