Financial Reporting and Statement Analysis A Strategic Approach,9780324186383

Financial Reporting and Statement Analysis A Strategic Approach

by ; ;
Edition: 5th
ISBN13: 9780324186383
ISBN10: 032418638X
Format: Hardcover
Pub. Date: 2003-07-18
Publisher(s): South-Western College Pub
Upgraded Edition: Click here!
List Price: $332.99

Buy New

Usually ships in 2 to 3 business days.
$332.66
Add to Cart

Rent Textbook

Select for Price
Add to Cart
There was a problem. Please try again later.

Used Textbook

We're Sorry
Sold Out

eTextbook

We're Sorry
Not Available

Buy from our Marketplace starting at $3.98

How Marketplace Works:

  • This item is offered by an independent seller and not shipped from our warehouse
  • Item details like edition and cover design may differ from our description; see seller's comments before ordering.
  • Sellers much confirm and ship within two business days; otherwise, the order will be cancelled and refunded.
  • Marketplace purchases cannot be returned to eCampus.com. Contact the seller directly for inquiries; if no response within two days, contact customer service.
  • Additional shipping costs apply to Marketplace purchases. Review shipping costs at checkout.

Summary

The premise of the text is that students learn financial statement analysis most effectively by performing the analysis on actual companies. Students learn to integrate concepts from economics, business strategy, accounting, and other business disciplines. The text is designed for courses on financial statement analysis and financial reporting found in accounting, finance, and economics departments.

Table of Contents

Chapter 1 Overview of Financial Reporting and Financial Statement Analysis 1(70)
Overview of Financial Statement Analysis
2(2)
Step 1: Identify the Industry Economic Characteristics
4(7)
Tools for Studying Industry Economics
6(5)
Value Chain Analysis
6(2)
Porter's Five Forces Classification
8(2)
Economic Attributes Framework
10(1)
Step 2: Identify the Company Strategy
11(3)
Framework for Strategy Analysis
11(2)
Application of Strategy Framework to PepsiCo's Beverage Segment
13(1)
Step 3: Assess the Quality of the Financial Statements
14(18)
Balance Sheet-Measuring Financial Position
15(6)
Income Statement-Measuring Operating Performance
21(6)
Statement of Cash Flows
27(4)
Summary of Financial Statements and Notes
31(1)
Step 4: Analyze Profitability and Risk
32(4)
Tools of Profitability and Risk Analysis
32(4)
Step 5: Value the Firm
36(35)
Role of Financial Statement Analysis in an Efficient Capital Market
37(1)
Sources of Financial Statement Information
38(1)
Summary
39(1)
Problems and Cases
40(20)
Case 1.1 Nike: Somewhere between a Swoosh and a Slam Dunk
60(11)
Chapter 2 Asset and Liability Valuation and Income Measurement 71(40)
Asset and Liability Valuation
72(7)
Historical Value: Acquisition Cost
72(1)
Historical Value: Adjusted Acquisition Cost
73(1)
Historical Value: Present Value of Cash Flows Using Historical Interest Rates
74(2)
Current Values: Current Replacement Cost
76(1)
Current Values: Net Realizable Value
76(1)
Current Values: Present Value of Cash Flows Using Current Interest Rates
77(1)
GAAP Valuations
78(1)
Income Recognition
79(5)
Treatment 1: Value Changes Recognized on the Balance Sheet and Income Statement When Realized
79(2)
Treatment 2: Value Changes Recognized on the Balance Sheet When They Occur but Recognized in Net Income When Realized
81(1)
Treatment 3: Value Changes Recognized on the Balance Sheet and the Income Statement When They Occur
82(2)
Summary of Asset and Liability Valuation and Income Recognition
84(1)
Accounting for Income Taxes
84(9)
Overview of Income Tax Accounting
85(4)
Measuring Income Tax Expense: A Bit More to the Story
89(3)
Reporting Income Taxes in the Financial Statements
92(1)
Framework for Analyzing the Effects of Transactions on the Financial Statements
93(6)
Overview of Analytical Framework
95(4)
Summary of Analytical Framework
99(1)
Summary
99(1)
Problems and Cases
100(11)
Chapter 3 Income Flows versus Cash Flows: Key Relationships in the Dynamics of a Business 111(65)
Income Flows, Cash Flows, and Life Cycle Relations
113(14)
Net Income and Cash Flow from Operations
113(4)
Relation between Cash Flows from Operating, Investing, and Financing Activities
117(2)
Illustrations of Cash Flow Relations
119(8)
Preparing the Statement of Cash Flows
127(9)
Algebraic Formulation
128(1)
Classifying Changes in Balance Sheet Accounts
128(7)
Illustration of the Preparation Procedure
135(1)
Summary
136(2)
Problems and Cases
138(16)
Case 3.1 W.T. Grant Co.
154(22)
Chapter 4 Profitability Analysis 176(86)
Profitability Analysis
178(1)
Rate of Return on Assets
178(28)
Disaggregating ROA
181(1)
Economic and Strategic Factors in the Interpretation of ROA
182(10)
Analyzing the Profit Margin for ROA
192(6)
Analyzing Total Assets Turnover
198(4)
Supplementing ROAR in Profitability Analysis
202(4)
Rate of Return on Common Shareholders' Equity
206(5)
Earnings per Common Share
211(3)
Calculating EPS
211(3)
Criticisms of EPS
214(1)
Interpreting Financial Statement Ratios
214(2)
Comparisons with Corresponding Ratios of Earlier Periods
214(1)
Comparisons with Corresponding Ratios of Other Firms
215(1)
Summary
216(1)
Problems and Cases
217(27)
Case 4.1 Profitability and Risk Analysis of Wal-Mart Stores
244(8)
Case 4.2 Specialty Apparel Retailing: The Gap and Limited Brands
252(10)
Chapter 5 Risk Analysis 262(80)
Framework for Risk Analysis
263(2)
Analyzing Short-term Liquidity Risk
265(6)
Analyzing Long-term Solvency Risk
271(4)
Analyzing Credit Risk
275(6)
Analyzing Bankruptcy Risk
281(15)
The Bankruptcy Process
281(1)
Models of Bankruptcy Prediction
282(11)
Synthesis of Bankruptcy Prediction Research
293(3)
Market Equity Beta Risk
296(2)
Financial Reporting Manipulation Risk
298(6)
Motivations for Earnings Manipulation
299(1)
Empirical Research on Earnings Manipulation
299(2)
Application of Beneish's Model to Sunbeam Corporation
301(3)
Summary of Income Manipulation Risk
304(1)
Summary
304(1)
Problems and Cases
305(8)
Case 5.1 Massachusetts Stove Company-Bank Lending Decision
313(7)
Case 5.2 Fly-By-Night International Group: Can this Company Be Saved?
320(11)
Case 5.3 Millennial Technologies: Apocalypse Now
331(11)
Chapter 6 Quality of Accounting Information and Adjustments to Reported Financial Statement Data 342(86)
Accounting Quality
343(6)
High Quality Reflects Economic Information Content
344(2)
High Quality Signals Earnings Persistence Over Time
346(3)
Discontinued Operations
349(4)
Extraordinary Items
353(2)
Changes in Accounting Principles
355(5)
Items of Other Comprehensive Income
360(2)
Impairment Losses on Long-lived Assets
362(3)
Restructuring and Other Charges
365(6)
Changes in Estimates
371(3)
Gains and Losses from Peripheral Activities
374(2)
Restated Financial Statement Data
376(1)
Account Classification Differences
377(4)
Financial Reporting Worldwide
381(2)
Earnings Management
383(2)
Summary
385(1)
Problems and Cases
386(20)
Case 6.1 International Paper: A Recurring Dilemma
406(6)
Case 6.2 Tanaguchi Corporation-Part A
412(1)
Appendix 6.1 (Case 6.2) Unconsolidated Financial Statements for Tanaguchi Corporation
413(6)
Appendix 6.2 (Case 6.2) Comparison of U.S. and Japanese GAAP
419(6)
Case 6.3 Tanaguchi Corporation-Part B
425(3)
Chapter 7 Revenue Recognition and Related Expenses 428(91)
Income Recognition
429(19)
Criteria for Revenue Recognition
430(3)
Criteria for Expense Recognition
433(1)
Application of Revenue and Expense Recognition Criteria
434(5)
Income Recognition for Long-term Contractors
439(5)
Revenue Recognition when Cash Collectibility Is Uncertain
444(4)
Inventory Cost-flow Assumption
448(11)
FIFO
449(1)
LIFO
449(3)
Weighted Average
452(1)
Conversion from LIFO to FIFO
452(4)
Stock Price Reaction to Changes in Inventory Cost-flow Assumption
456(1)
Persistent Earnings and the Cost-flow Assumption
457(2)
Accounting for Fixed Assets
459(7)
Fixed Asset Valuation
459(1)
Depreciable Life
460(2)
Depreciation Method
462(2)
Impairment of Fixed Assets
464(1)
Persistent Earnings and Fixed Asset Reporting
464(2)
Accounting for Intangible Assets
466(9)
Accounting for Research And Development Costs
468(2)
Accounting for Software Development Costs
470(2)
Accounting for Goodwill
472(1)
Persistent Earnings and Intangible Asset Reporting
473(1)
Valuing Intangibles-Is It Possible?
474(1)
Summary
475(1)
Appendix 7.1 Accounting for the Effects of Changing Prices
476(6)
Problems and Cases
482(12)
Case 7.1 Arizona Land Development Company
494(9)
Case 7.2 Chiron Corporation-An R&D Puzzle
503(4)
Case 7.3 Corporãcion Industrial Sanluis: Coping With Changing Prices
507(4)
Case 7.4 America Online: Past Reporting Vindicated?
511(8)
Chapter 8 Liability Recognition and Related Expenses 519(123)
Principles of Liability Recognition
520(1)
Principles of Liability Valuation
521(1)
Application of Criteria for Liability Recognition
522(4)
Controversial Issues in Liability Recognition
526(8)
Issuance of Hybrid Securities
526(1)
Off-Balance-Sheet Financing Arrangements
527(7)
Leases
534(12)
Operating Lease Method
535(1)
Capital Lease Method
536(2)
Choosing the Accounting Method
538(2)
Effects on Lessor
540(3)
Lease Accounting for Tax Purposes
543(1)
Converting Operating Leases to Capital Leases
543(3)
Impact of Accounting for Operating Leases as Capital Leases
546(1)
Derivative Instruments
546(18)
Nature and Use of Derivative Instruments
548(1)
Accounting for Derivatives
549(3)
Illustrations of Accounting for Derivatives
552(9)
Summary of Examples
561(1)
Disclosures Related to Derivative Instruments
561(2)
Accounting Quality Issues and Derivatives
563(1)
Retirement Benefits
564(15)
Pensions
564(12)
Analysts' Treatment of Pensions
576(1)
Impact of Actuarial Assumptions
577(1)
Signals about Earnings Persistence
578(1)
Postretirement Benefits Other than Pensions
579(1)
Income Taxes
580(14)
Review of Income Tax Accounting
580(3)
Required Income Tax Disclosures
583(7)
Assessing a Firm's Tax Position
590(1)
Analyzing PepsiCo's Income Tax Disclosures
591(3)
Summary of Income Taxes
594(1)
Understanding Reserves in the Financial Statements
594(4)
Nature of a Reserve Account
596(1)
Use of Reserve Accounts
596(2)
Summary of Reserves
598(1)
Summary
598(1)
Problems and Cases
599(29)
Case 8.1 American Airlines and United Airlines: A Pension for Debt
628(9)
Case 8.2 CIFRA: Remodeling the Financial Statements
637(5)
Chapter 9 Intercorporate Entities 642(96)
Corporate Acquisitions
643(9)
Overview of the Purchase and Pooling-of-Interests Methods
644(1)
Illustration of the Purchase Method
645(5)
Corporate Acquisitions and Income Taxes
650(1)
Corporate Disclosures on Acquisitions
651(1)
Investments in Securities
652(21)
Accounting for Investments
652(1)
Percentage of Voting Stock
653(1)
Minority, Passive Investments
654(5)
Minority, Active Investments
659(2)
Majority, Active Investments
661(9)
Primary Beneficiary of a Variable Interest Entity
670(2)
Income Tax Consequences of Investments in Securities
672(1)
Foreign Currency Translation
673(12)
Functional Currency Concept
674(1)
Translation Methodology-Foreign Currency Is Functional Currency
674(5)
Translation Methodology-U.S. Dollar Is Functional Currency
679(1)
Implications of Functional Currency Determination for Analysis
680(4)
Foreign Currency Translation and Income Taxes
684(1)
Accounting for Stock-based Compensation
685(4)
Summary
689(1)
Problems and Cases
689(23)
Case 9.1 Fisher Corporation
712(15)
Case 9.2 Clark Equipment Company: Analyzing a Joint Problem
727(7)
Case 9.3 Loucks Corporation: Obtaining Security in Translation
734(4)
Chapter 10 Forecasting Pro Forma Financial Statements 738(69)
Overview
739(1)
Introduction to Forecasting
739(2)
Preparing Pro Forma Financial Statements
741(6)
General Forecasting Principles
742(1)
Six-Step Forecasting Game Plan
743(2)
Practical Tips for Implementing the Six-Step Game Plan
745(1)
Using FSAP to Prepare Pro Forma Financial Statements
746(1)
Step 1: Project Sales and Other Revenues
747(5)
Projecting Sales
747(4)
Projecting Other Revenues
751(1)
Step 2: Project Operating Expenses
752(2)
Step 3: Project the Assets on the Balance Sheet
754(9)
Step 4: Project Liabilities and Shareholders' Equity
763(7)
Step 5: Project Interest Expense, Interest Income, Income Tax Expense, and the Change in Retained Earnings
770(5)
Closing the Loop: Solving for Co-Determined Variables
774(1)
Step 6: Projecting the Statement of Cash Flows
775(3)
Shortcut Approaches to Forecasting
778(4)
Analyzing Pro Forma Financial Statements
782(2)
Sensitivity Analysis and Reactions to Announcements
784(1)
Summary
785(1)
Problems and Cases
786(11)
Case 10.1 Massachusetts Stove Company: Analyzing Strategic Options
797(10)
Chapter 11 Valuation: Cash-flow-based Approaches 807(72)
Introduction and Overview
808(1)
Rationale for Cash-flow-based Valuation
809(2)
Overview of Cash-flow-based Valuation
811(1)
Measuring Periodic Free Cash Flows
811(12)
Continuing Value of Future Free Cash Flows
823(4)
Discount Rates
827(10)
Cash-flow-based Valuation Equations
837(3)
Illustrations of Cash-flow-based Valuation
840(1)
Valuation of a Single Project
840(14)
Valuation of PepsiCo
842(1)
Valuation of PepsiCo Using Free Cash Flows to All Debt and Equity Capital Stakeholders
843(5)
Valuation of PepsiCo Using Free Cash Flows to Common Equity Shareholders
848(6)
Evaluation of Present Value of Cash Flows Valuation Method
854(1)
Summary
854(1)
Problems and Cases
854(9)
Cases
863(1)
Case 11.1 Holmes Corporation: LBO Valuation
863(16)
Chapter 12 Valuation: Earnings-based Approaches 879(33)
Introduction and Overview
880(1)
Rationale for Earnings-based Valuation
881(3)
Earnings-based Valuation: Practical Advantages and Common Concerns
884(2)
Theoretical and Conceptual Foundations for Residual Income Valuation
886(4)
Residual Income Model with Finite Horizon Earnings Forecasts and Continuing Value Computation
890(2)
Valuation of PepsiCo Using the Residual Income Model
892(6)
Discount Rates for Residual Income
893(1)
PepsiCo's Book Value of Equity and Residual Income
893(2)
Discounting PepsiCo's Residual Income to Present Value
895(1)
Necessary Adjustments to Compute Common Equity Share Value
896(1)
Sensitivity Analysis and Investment Decision-Making
896(2)
Residual Income Model Implementation Issues
898(4)
Dividends Valuation Model
902(4)
Application of the Dividends Valuation Model to PepsiCo
904(2)
Causes of Differences in Residual Income, Dividends, and Free Cash Flow Value Estimates
906(1)
Summary Comments on Valuation
907(1)
Problems and Cases
908(3)
Cases
911(1)
Chapter 13 Valuation: Market-based Approaches 912(50)
Introduction and Overview
913(2)
Market Multiples of Accounting Numbers
915(1)
Market-to-Book and Value-to-Book Ratios
916(9)
A Theoretical Model of the Value-to-Book Ratio
916(5)
Reasons Why VB Ratios and MB Ratios May Differ from One
921(1)
Empirical Data on MB Ratios
922(1)
Empirical Research Results on the Predictive Power of MB Ratios
922(3)
Application of the Value-to-Book Model to PepsiCo
925(4)
Price-Earnings and Value-Earnings Ratios
929(14)
A Theoretical Model for the Value-Earnings Ratio
929(1)
Price-Earnings Ratios
930(12)
Summary of VE And PE Ratios
942(1)
Using Market Multiples of Comparable Firms
943(1)
Price Differentials
944(4)
Computing PDIFF for PepsiCo
945(3)
Reverse Engineering
948(2)
Reverse Engineering PepsiCo's Stock Price
948(2)
The Relevance of Academic Research for the Work of the Security Analyst
950(5)
Level of Aggregation Issue
951(1)
Theory Development and Practice Feed Each Other
951(1)
Has the Theory of Capital Market Efficiency Gotten in the Way?
952(1)
Striking Evidence on the Degree of Market Efficiency and Inefficiency with Respect to Earnings
953(2)
Summary
955(1)
Problems
956(5)
Cases
961(1)
Appendix A Statements and Notes for PepsiCo, Inc. and Subsidiaries 962(43)
Appendix B Management's Discussion and Analysis of Results of Operations and Financial Condition for PepsiCo, Inc. and Subsidiaries 1005(24)
Appendix C Output of Analysis Spreadsheet in Financial Statement Analysis Package (FSAP) for PepsiCo, Inc. and Subsidiaries 1029(8)
Appendix D Output of Forecasts and Valuations Spreadsheets in Financial Statement Analysis Package (FSAP) for PepsiCo 1037(32)
Index 1069

An electronic version of this book is available through VitalSource.

This book is viewable on PC, Mac, iPhone, iPad, iPod Touch, and most smartphones.

By purchasing, you will be able to view this book online, as well as download it, for the chosen number of days.

Digital License

You are licensing a digital product for a set duration. Durations are set forth in the product description, with "Lifetime" typically meaning five (5) years of online access and permanent download to a supported device. All licenses are non-transferable.

More details can be found here.

A downloadable version of this book is available through the eCampus Reader or compatible Adobe readers.

Applications are available on iOS, Android, PC, Mac, and Windows Mobile platforms.

Please view the compatibility matrix prior to purchase.