Interpreting and Analyzing Financial Statements

Chapter 1: Introduction
Nike, Under Armour, Adidas
WHAT IS ACCOUNTING?
THE FOUR FINANCIAL STATEMENTS
THE BALANCE SHEET
THE INCOME STATEMENT
STATEMENT OF STOCKHOLDERS' EQUITY
STATEMENT OF CASH FLOWS
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
Historical Cost Principle
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
RATIO ANALYSIS
Debt Ratio
Asset Turnover Ratio
Return on Sales (ROS) Ratio
Return on Assets (ROA) Ratio
TREND ANALYSIS
COMMON-SIZE STATEMENTS
ACTIVITIES

Chapter 2: Balance Sheet
The Walt Disney Company, News Corp, Time Warner
INTRODUCTION
UNDERSTANDING THE WALT DISNEY COMPANY'S BALANCE SHEET
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
DEBT VERSUS EQUITY
ANALYZING THE BALANCE SHEET
Liquidity: Current Ratio
Solvency: Debt Ratio
Trend Analysis
Common-size Balance Sheet
ACTIVITIES

Chapter 3: Income Statement
Amazon.com, Sears Holdings, eBay, Starbucks
INTRODUCTION
UNDERSTANDING AMAZON.COM'S INCOME STATEMENT
STEP ONE: REVENUES - COST OF SALES = GROSS PROFIT
Revenues and Revenue Recognition
Expenses and the Matching Principle
STEP TWO: GROSS PROFIT - OPERATING EXPENSES = OPERATING INCOME
STEP THREE: OPERATING INCOME +/- NONOPERATING REVENUES AND EXPENSES = INCOME BEFORE INCOME TAX
STEP FOUR: INCOME BEFORE INCOME TAX - PROVISION FOR INCOME TAX = INCOME FROM CONTINUING OPERATIONS
STEP FIVE: INCOME FROM CONTINUING OPERATIONS +/- NONRECURRING ITEMS = NET INCOME
ANALYZING THE INCOME STATEMENT
Return on Sales
Asset Turnover Ratio
Return on Assets
Gross Profit Margin
Trend Analysis
Common-Size Analysis
ACTIVITIES

Chapter 4: Statement of Stockholders' Equity
Freeport-McMoRan Copper & Gold
INTRODUCTION
STOCKHOLDERS' EQUITY ON THE BALANCE SHEET
STATEMENT OF STOCKHOLDERS' EQUITY
TREASURY STOCK
RETAINED EARNINGS
OTHER COMPREHENSIVE INCOME
STOCK SPLITS & STOCK DIVIDENDS
RETURN ON EQUITY
FINANCIAL LEVERAGE RATIO
TIMES INTEREST EARNED RATIO
EARNINGS PER SHARE
DIVIDEND RATE
PRICE EARNINGS RATIO
ACTIVITIES

Chapter 5: Statement of Cash Flows
Cedar Fair, L.P.
INTRODUCTION
THREE CATEGORIES OF CASH FLOWS
Financing Activities
Investing Activities
Operating Activities
Operating Activities-The Direct Method
Operating Activities-The Indirect Method
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
ANALYZING THE STATEMENT OF CASH FLOWS
Free Cash Flow
Cash Flow Adequacy
Cash Flow Liquidity
Quality of Income
ACTIVITIES

Chapter 6: Specific Accounts
Research in Motion Limited, Motorola Mobility, Inc.
INTRODUCTION
CASH AND CASH EQUIVALENTS
INVESTMENTS
ACCOUNTS RECEIVABLE
Accounts Receivable Turnover
Accounts Receivable Days
INVENTORY
Specific Identification
First-In, First-Out
Last-In, First-Out
International Financial Reporting Standards
Gross Profit Margin
Inventory Turnover
Inventory Days
PROPERTY, PLANT, AND EQUIPMENT
Straight-Line Depreciation
Double-Declining Balance Depreciation
Comparing Straight-Line with Double-Declining Balance
Gains and Losses on Sale of PPE
International Financial Reporting Standards
CURRENT AND LONG-TERM LIABILITIES
ACTIVITIES

Chapter 7: The Accounting Cycle
INTRODUCTION
THE 10-STEP ACCOUNTING CYCLE
ANALYZE TRANSACTIONS USING THE ACCOUNTING EQUATION
PREPARE JOURNAL ENTRIES USING DEBITS AND CREDITS
Step 1: Analyze and Prepare Transaction Journal Entries (TJEs)
Step 2: Post TJEs to the Ledger
Step 3: Prepare the Unadjusted Trial Balance
Step 4: Prepare Adjusting Journal Entries (AJEs)
Step 5: Post AJEs to the Ledger
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