Map or Maze 17 Usefulness 20 Volume of Information 20 Global Economy 23 Where to Find a Company’s Financial Statements 24 The Financial Statements 25 Notes to the Financial Statements 25 Auditor’s Report 26 Financial Reporting Reforms 27 Management Discussion and Analysis 29 Pandora (a.k.a. “PR Fluff”) 32 Proxy Statement 33 Missing and Hard-to-Find Information 33 Characteristics, Assumptions, Principles, and Basis of Accounting 34 Complexities and the Quality of Financial Reporting 35 Accounting Choices 36 Timing of Revenue and Expense Recognition 37 Discretionary Items 37 The Journey Through the Maze Continues 38 Appendix 1A. Sage Inc. 2024 Annual Report 39 Self-Test 51 Study Questions and Problems 54 Case 1.1 Analysis Case 56 Case 1.2 Comprehensive Team Analysis Case 57 Case 1.3 Locating Information in a Form 10-K 58 Case 1.4 CPA Evolution Model Curriculum Case 59
Chapter 2. The Balance Sheet 61
Financial Condition Consolidation Balance Sheet Date Comparative Data Balance Sheet Format Common-Size Balance Sheet Assets Current Assets Cash and Cash Equivalents Marketable Securities Accounts Receivable Inventories Inventory Accounting Methods Prepaid Expenses Property, Plant, and Equipment Straight Line Accelerated Cryptocurrency Goodwill Other Assets Liabilities Current Liabilities Accounts Payable Short-Term Debt Current Maturities of Long-Term Debt Accrued Liabilities Unearned Revenue or Deferred Credits Deferred Federal Income Taxes Long-Term Debt Leases Pensions and Postretirement Benefits Commitments and Contingencies Stockholders’ Equity Common Stock Additional Paid-In Capital Retained Earnings Other Equity Accounts Quality of Financial Reporting—The Balance Sheet Other Balance Sheet Items Self-Test Study Questions and Problems Case 2.1 Analysis Case Case 2.2 Comprehensive Team Analysis Case Case 2.3 CPA Evolution Model Curriculum Case
Chapter 3. Income Statement, Comprehensive Income, and Statement of Stockholders’ Equity 108
The Income Statement and Comprehensive Income Common-Size Income Statement Net Sales Cost of Goods Sold Gross Profit Operating Expense Operating Profit Other Income (Expense) Equity Earnings Unusual and Infrequent Items Earnings before Income Taxes/Effective Tax Rate Discontinued Operations Net Earnings Earnings per Common Share Statement of Comprehensive Income The Statement of Stockholders’ Equity Earnings Quality, Cash Flow, and Segmental Accounting Appendix 3A. A Guide to Earnings Quality Self-Test Study Questions and Problems Case 3.1 Analysis Case Case 3.2 Comprehensive Team Analysis Case Case 3.3 CPA Evolution Model Curriculum Case
Chapter 4. Statement of Cash Flows 154 Why Cash Flow Is Important: An Example 155 Statement of Cash Flows: Basic Principle 156 Preparing a Statement of Cash Flows Calculating Cash Flow from Operating Activities Indirect Method Cash Flow from Investing Activities Cash Flow from Financing Activities Change in Cash Analyzing the Statement of Cash Flows Cash Flow from Operations Nocash Corporation Sage Inc.: Analysis of the Statement of Cash Flows 171 Sage Inc. Analysis: Cash Flow from Operating Activities Summary Analysis of the Statement of Cash Flows Analysis of Cash Inflows Analysis of Cash Outflows Qualitative Issues Relating to the Statement of Cash Flows 174 Are We There Yet?
Appendix 4A. Statement of Cash Flows—Direct Method 176 Self-Test Study Questions and Problems Case 4.1 Analysis Case Case 4.2 Comprehensive Team Analysis Case Case 4.3 CPA Evolution Model Curriculum Case
Chapter 5. The Analysis of Financial Statements 196
Objectives of Analysis 196 Sources of Information 198 Proxy Statement Auditor’s Report Management Discussion and Analysis Supplementary Schedules Form 10-K and Form 10-Q Other Sources
Tools and Techniques 200 Common-Size Financial Statements Key Financial Ratios Liquidity Ratios: Short-Term Solvency Cash Conversion Cycle or Net Trade Cycle Activity Ratios: Asset Liquidity, Asset Management Efficiency Leverage Ratios: Debt Financing and Coverage Profitability Ratios: Overall Efficiency and Performance Market Ratios
Analyzing the Data 216 Background: Economy, Industry, and Firm Short-Term Liquidity Operating Efficiency Capital Structure and Long-Term Solvency Profitability Relating the Ratios—The Du Pont System Projections and Pro Forma Statements Summary of Analysis Financial Statements: A Map
Appendix 5A. The Analysis of Segmental Data 229 Self-Test Study Questions and Problems Case 5.1 Analysis Case Case 5.2 Comprehensive Team Analysis Case Case 5.3 CPA Evolution Model Curriculum Case
Appendixes 253 Appendix A. Summary of Financial Ratios Appendix B. Solutions to Self-Tests Appendix C. Glossary Index