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Analysis of financial statements

Author: Bernstein, Leopold A. ; Wild, John J.Publisher: McGraw-Hill, 2000.Edition: 5th ed.Language: EnglishDescription: Various pagings : Graphs/Ill. ; 24 cm.ISBN: 0070597103Type of document: BookBibliography/Index: Includes index
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Asia Campus
Main Collection
Print HG60 .B462 2000
(Browse shelf)
900174329
Available 900174329
Total holds: 0

Includes index

Digitized

Analysis of financial statements C O N T E N T S PART ONE FINANCIAL STATEMENT ANALYSIS AND REPOR'IING Chapter One 1 Overview of Financial Statement Analysis 3 Focus on Analysis: Adaptec 6 Users of Financial Statements 8 Business Activities in a Market Economy 9 Planning Activities 9 Financing Activities 11 Investing Activities 14 Operating Activities 15 Financial Statements Capture Business Activities 16 Balance Sheet 18 Income Statement 19 Statement of Shareholders 'Equity 20 Statement of Cash Flows 2 1 Links between Financial Statements 22 Information Accompanying Financial Statements 26 Management's Discussion and Analysis (MDandA) 26 Management Report 26 AuditorReport 27 ~ x ~ l a n a t o Notes 27 ry Supplementary Information 28 Social Responsibility Reports 29 Proxy Statements 29 Preview of Financial Statement Analysis 30 Building Blocks of Analysis 31 Comparative Financial Statement Analysis 32 Common-Size Financial Statement Analysis 37 Ratio Analysis of Financial Statements 40 Specialized Analysis Tools 45 Financial Statement Analysis in an Efficient Capital Market 45 Capital Market Eficiency 45 Market Eficiency Implications for Financial Statement Analysis 45 Preview of This Book's Organization 48 Appdndix 1 Investment Theory and Financial Statement Analysis 52 A Chapter Two Analysis Objectives and Financial Reporting 57 Objectives of Financial Statement Analysis 59 Creditors 59 Equity Investors 62 Management 66 Auditors 67 Directors 68 Mergers and Acquisition Analysts 68 Regulators 69 Other Important Users 69 Accounting Information: Basis of Analysis 69 Accounting Measurement and Reporting of Business Activity. 70 Relevance of Accounting Information 71 Infomurtion Environment for Financial Statement Analysis 73 Accounting Principles and Limitations 74 Monetary Expression 74 Simplification and Summarization 74 Judgment and Incentives 74 Interim Disclosures and Estimates 76 Historical Cost Measurement 77 Unstable Monetary Unit 77 Need to Understand Accounting Measurements and Disclosures 77 Implications of Accounting Risk 79 Additional Analysis Techniques 80 Reconstruction of Business Activities and Transactions 80 Indirect Evidence and Evaluation 82 Industry Comparability Analysis of Financial Statements 85 Analytical Use of Accounting Standards and Assumptions 85 Traditional Market Measurns 88 Appendix 2 Accounting Principles Underlying Financial Statements 90 A Appendix 2B Additional Tools and Sources for Financial Statement Analysis 102 [PART TWO FINANCIAL ANALYSIS APPLICATION AND INTERPRETATION 109 Chapter Three She-Term Liquidity 111 Importance of Short-Term Liquidity 113 Analyzing Working Capital 114 Current Assets 115 Current Liabilities 117 Working Capital Measure of Liquidity 118 Current Ratio Measure of Liquidity 118 Using the Current Ratio for Analysis 122 Cash-Based Ratio Measures of Liquidity 129 Operating Activity Analysis of Liquidity 130 Accounts Receivable Liquidity Measures 130 Inventory Turnover Measures 135 Liquidity of Current Liabilities 140 Additional Short-Term Liquidity Measures 142 Current Assets Composition 142 Liquidity Index 143 Acid-Test (Quick) Ratio 144 Cash Flow Measures 145 Financial Flexibility 145 Management's Discussion and Analysis 146 What-If Analysis 146 Chapter Four Forecasting and Pro Forma Analysis 151 Cash Flow Patterns 153 Short-Term Cash Forecasting 154 Importance of Forecasting Sales 155 Cash Flow Forecasting with Pro Fonna Analysis 155 Long-Term Cash Forecasting 162 Analysis of Prior Cash Flows for Forecasting 163 Forecasting Sources and Uses of Cash Flows 167 Specialized Cash Flow Ratios 172 Cash Flow Adequacy Ratio 172 Cash Reinvestment Ratio 173 Chapter Five Capital Structure and Solvency 176 Keys to Solvency Analysis 178 Importance of Capital Structure 179 Characteristics of Debt and Equity 181 Motivation for Debt Capital 182 Measuring Eflects of Financial Leverage 186 Accounting Implications for Capital Structure Analysis 188 Adjustments to Book Values of Liabilities 189 Adjustments to Book Values of Assets 193 Capital Structure Composition and Solvency 195 Long-Term Projections in Analyzing Solvency 196 Common-Size Statements in Solvency Analysis 197 Capital Structure Measures for Solvency Analysis 198 Interpretation of Capital Structure Measures 202 Asset-Based Measures of Solvency 203 Asset,Composition in Solvency Analysis 203 Asset Coverage in Solvency Analysis 204 Importance of Earnings Coverage 205 Relation of Earnings to Fixed Charges 205 Emes Interest Earned Analysis 214 Relation of Cash Flow to Fixed Charges 214 Earnings Coverage of Preferred Dividends 218 Interpreting Earnings Coverage Measures 219 Capital Structure Risk and Return 221 Appendix SA Rating Debt Obligations 223 Appendix SB Predicting Financial Distress 229 Appendix 5C Analytical Adjustments to the Long-Term Debt to Equity Ratio 23 1 Chapter Six Return on Invested Capital 234 Importance of Return on Invested Capifal 236 Measuring Managerial Efectiveness 237 Measuring Profitability 237 Measure of Forecasted Earnings 237 Measuring for Planning and Control 237 Components of Return on Invested Capital 238 Defining Invested Capital 238 Defining Income 243 Adjustments of Invested Capital and Income 244 Computing Return on Invested Capital 244 Analyzing Return on Assets 247 Disaggregating Return on Assets 248 Relation between Profit Margin and Asset Turnover 249 Asset TurnoverAnalysis 253 Analyzing Return on Common Equity 256 Disaggregating Return on Common Equity 257 Computing Return on Invested Capital 260 Assessing Growth in Common Equity 263 Financial Leverage and Return on Common Equity 263 Return on Common Shareholders' Equity versus Investment 266 Chapter Seven Profitability Analysis 270 Analyzing Company Profitability 272 Factors in Measuring Company Income 273 Two-PhaseAnalysis of Income 275 alyzing Company Revenues 276 Major Sources of Revenues 276 Persistence of Revenues 283 Relations between Revenues, Receivables, and Inventories 285 Revenue Recognition and Measurement 286 yzing Company Cost of Sales 287 Measuring Gross Profit (Margin) 2815 Analyzing Changes in Gross Profit 288 Interpreting Changes in Gross Profit 290 yzing Company Expenses 291 Selling Expenses 292 reciation Expense 295 rntenance and Repairs Expenses 295 Amortization of Special Costs 296 General and Administrative Expenses 296 Financing and Other Expenses 296 Income Tar Expenses 298 VariationAnalysis of Income and Its Components 305 Break-Even Analysis 305 Break-Even Analysis Case 307 Limitations in Break-Even Analysis 312 Uses and Implications of Break-Even Analysis 313 Chapter Eight Earnings-BasedAnalysis and Valuation 322 Earnings Quality 324 325 331 334 Measuring Earnings Quality Balance S h e e t Annzysis a n d E a r n i n g s Q u a l i t y External Factors-and Earnings Q u a l i t y Earnings Persistence 334 Recasting and Adjusting Earnings for Analysis . 335 Determinants of Earnings Persistence 341 Persistenie of Extraordinary Items in Earnings 344 Earnings-Based Valuation 350 Relation between Stock Prices and Accounting Data 352 Fundamental ValuationMultiples 353 Earning Power and Forecasting for Valuation 356 Illustration of Earnings-Based Valuation 358 Earning Power 358 Earnings Forecasting 360 Interim Reports for Monitoring and Revising Earnings Estimates 364 Comprehensive Case: Applying Financial Statement Analysis CCl Steps in Analyzing Financial Statements CC3 Building Blocks of Financial Statement Analysis CC5 Reporting on Financial Statement Analysis CC6 Specialization in Financial Statement Analysis CC8 Comprehensive Case: Campbell Soup Company CC8 Preliminary Financial Analysis CC8 Short-Tenn Liquidity CC19 Cash Flow Analysis and Forecasting CC23 Capital Structure and Solvency CC35 Return on Invested Capital CC38 Analysis of Asset Utilization CC42 Analysis of Operating Performance and Profitability CC43 Summary Evaluation and Inferences CC46 Supplement A Financial Statements A1 Adaptec, Inc. A2 Campbell Sdup Company A32 Interest 'hbles I1 Index IN1

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