Financial Statement Analysis

Financial Statement Analysis

K. R. Subramanyam

Language: English

Pages: 784

ISBN: 0073379433

Format: PDF / Kindle (mobi) / ePub

Financial Statement Analysis, 10e, emphasizes effective business analysis and decision making by analysts, investors, managers, and other stakeholders of the company. It continues to set the standard in showing students the keys to effective financial statement analysis. The textbook is set up in a three part framework which makes this textbook one of the best selling books in the market. It begins with an overview (chapters 1-2), followed by accounting analysis (chapters 3-6) and then financial analysis (chapters 7-12). The book presents a balanced view of analysis, including both equity and credit analysis, and both cash-based and earnings-based valuation models. The tenth edition 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. Apply a concise and succinct writing style to make the material accessible












that the company has the ability to increase its borrowing significantly, in reality it is not so. All the available credit lines are in the form of short-term working capital finance. Therefore, these credit lines can be used only to specifically finance Alliance One’s working capital needs. Accordingly, the company can borrow only to the extent that it has current assets such as inventory and receivables. Besides, Alliance One’s business is seasonal, and so it is possible that its working

stock and 10% preferred stock. The returns for both securities (including dividends and price appreciation) in the past few years are consistently around 10%. In which security do you invest? 169 170 Financial Statement Analysis Retained Earnings Retained earnings are the earned capital of a company. The retained earnings account reflects the accumulation of undistributed earnings (net income) of a company since its inception. This contrasts with the capital stock and additional paid-in

unrealized gain of $25,000 to record Chapter Two | Financial Reporting and Analysis the appreciation in the condo’s value during the year. In addition, the fair value model also recognizes an unrealized gain of $2,000, which is related to the decrease in the market value of the bonds. Therefore, income under the fair value accounting model for Year 1 is $36,000. Shareholders’ equity at the end of Year 1 is equal to opening shareholders’ equity plus income. To understand how fair value

interpret financial statements as a preview to more detailed analyses. Apply several basic financial statement analysis techniques. Define and formulate some basic valuation models. Explain the purpose of financial statement analysis in an efficient market. Analysis Feature Something to Smile About? Colgate has been creating smiles the world over for the past 200 years. However, the smiles are not limited to users of its immensely popular toothpaste. Colgate’s financial and stock price

entitled to all residual returns of a company. Certain other securities, such as convertible bonds, straddle the line separating liabilities and equity and represent a hybrid form of financing. This chapter describes these different forms of financing, how companies account and report for them, and their implications for analysis of financial statements. 133 134 Financial Statement Analysis Analyzing Financing Activities Debt Financing Accounting for debt Debt-related disclosures Analyzing

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