Financial Statement Analysis

Financial Statement Analysis, 9e, emphasizes effective business analysis and decision making by analysts, investors, managers, and other stakeholders of the company. It continues to set the standard (over 8 prior editions and hundreds of thousands in unit book sales) in showing students the keys to effective financial statement analysis. It begins with an overview (chapters 1-2), followed by accounting analysis (chapters 3-6) and then financial analysis (chapters 7-11). The book presents a balanced view of analysis, including both equity and credit analysis, and both cash-based and earnings-based valuation models. The book is aimed at accounting and finance classes, and the professional audience as it shows the relevance of financial statement analysis to all business decision makers. The authors: 1. Use numerous and timely 'real world' examples and cases 2. Draw heavily on actual excerpts from financial reports and footnotes 3. Focus on analysis and interpretation of financial reports and their footnotes 4. Illustrate debt and equity valuation that uses results of financial statement analysis 5. Have a concise writing style to make the material accessibleDell replaces Kodak as the featured company. Dell presents a healthy, growth company to illustrate the analysis; it is also used to explain many useful business practices. Campbell Soup is retained as another company for illustrations and assignments. Return on Invested Capital (Chapter 8) is substantially revised. Return on equity is decomposed into operating and non-operating components, reflecting current advances in financial statement analysis. The return on net operating assets (RNOA) is further decomposed into net operating asset turnover and operating profit margin. The operating and non-operating distinction is important and offers new insights on company performance.Off-balance-sheet financing discussion is expanded. Discussion of special purpose entities (SPEs) is expanded to include Variable Interest Entities (VIEs) following the passage of new accounting rules for consolidation and their importance in practice.Investments in marketable and derivative securities is moved to Chapter 6. This consolidates all securities investments in one chapter. The analysis of foreign currency disclosures is streamlined and moved to an appendix of Chapter 6. Expanded discussion of accrual accounting. Accrual accounting is the cornerstone of statement analysis. This edition includes further discussion to aid students in their analysis and interpretation of company fundamentals. Pension and OPEB discussion is simplified. A revised Chapter 3 focuses more on analysis and interpretation of postretirement benefit disclosures. The detailed accounting for them is moved to the appendix. Discussion of equity carve-outs is included. Equity carve-outs, spin-offs, and split-offs have increased in frequency as companies seek to unlock shareholder value. Chapter 3 includes a new section to introduce the accounting and interpretation of themComprehensive case is expanded to include a revised disaggregation of return on equity. Analysis framework in Chapter 8 is extended to the comprehensive case to reinforce the importance of the operating and non-operating distinction for financial statement analysis. Book is focused and practical. The authors continue to emphasize a streamlined and concise book with an abundance of practical applications and directions for analysis. Emphasis on analysis, less on mechanics. Details of financial reporting requirements are streamlined, and include only information necessary to conduct effective financial statement analysis. Emphasis on Valuation. All analysis sections include linkages to securities valuation when relevant Ĺź as debt and equity valuation is an important topic in financial statement analysis. The comprehensive case also demonstrates the application of valuation models. Special Purpose Entities. A section on special purpose entities is included with additional discussion and analysis of such off-balance-sheet financing. Special boxed features are updated and include references to fraud using real companies as examples. Consolidations and Analysis. Discussions of equity method accounting and consolidations reflect recent changes to accounting standards and their implications for financial statement analysis and interpretation. Prospective Analysis. An expanded section on prospective analysis (forecasting) is included. It provides step-by-step guidance on the forecasting process and demonstrates prospective analysis in stock valuation, including the comprehensive case.Analysis Features. Each chapter opens with a feature article drawn from the business press, that spotlights the importance of financial statement analysis. This gives readers a benchmark and motivation to apply the skills described in the chapter. Student Annotations. Marginal notes convey additional hints and examples, providing students with a basis to think critically about the issues discussed. Analysis Viewpoints. These allow readers to assume the role of business decision maker (investor, analyst, director, lender) to show real world applications of statement analysis. Research Insights boxes appear throughout the book and describe research that is relevant to analysis and interpretation of financial statements. Real Financial Statements. Dell is featured throughout the book and related assignments provide continuity based on those statements. Campbell SoupĹźs statements are also reproduced in the book and used for illustration and assignment materials.