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Interpreting and Analyzing Financial Statements, 1/e

Karen P. Schoenebeck, Wichita State University

Published July, 1997 by Prentice Hall Business Publishing

Copyright 1998, 165 pp.
Paper
ISBN 0-13-887514-6


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Summary

Suitable for use as a supplemental text in an undergraduate Financial Accounting course. It is designed to accompany Harrison and Horngren's Financial Accounting, 3rd Edition text—but equally adaptable as a supplement for other introductory financial accounting books. Promoting confidence in their strategic abilities, this series of preliminary activities helps prepare financial accounting students for a capstone project creating a comprehensive financial statement analysis. Each activity concentrates on only one aspect of the analysis and uses data from well-known corporations to pique students' interest and add relevancy.

Features


Draws financial statements from such companies as American Airlines, AT&T, Chrysler, Microsoft, Wal-Mart, and more.
Focuses on interpretation and analysis, keeping calculations to a minimum so students can better focus their time and attention.
Contains a wealth of activities that can generate class discussion or be used as individual or group assignments.
Compares carefully selected companies so students get a feel for the range and magnitude of expected amounts and ratios in the corporate world.
Introduces financial statements using four-years of comparative information; each line item is studied separately, and key questions highlight important trends.
Involves a research component in at least one activity per chapter, i.e., reading the Wall Street Journal, surfing the world-wide-web, or calling a local bank.
Emphasizes the significant role ratios have in analyzing financial statements.

  • Enables students to acquire a feel for the expected range and magnitude of the ratios and identify whether a high or low ratio is usually preferred.
Uses trend analysis to evaluate both the income statement and the balance sheet.
  • Places an emphasis on comparing the rate of increase or decrease of various account classifications within each financial statement.
Corporate Analysis final project, with four parts, requires students to research , analyze, and prepare a comprehensive written report. Each part can be assigned throughout the term, or it can be assigned as a whole capstone project.


Table of Contents
    1. Introduction to the Income Statement and the Balance Sheet.

      Activity 1: Examining Total Assets: Comparing Companies. Activity 2: Examining Assets Within the Automobile Industry. Activity 3: Examining How Assets are Financed: Comparing Companies. Activity 4: Examining Net Sales: Comparing Companies. Activity 5: Examining Net Sales Within the Retail Industry. Activity 6: Examining Net Income and Return on Sales within the Auto Industry. Activity 7: Fortune 500 Companies. Activity 8: Test Your Understanding: A Review of Chapter 1. Activity 9: Internet Research: The Global 500 List.

    2. Introduction To Analysis.

      Activity 10: Ratio Analysis: Current Ratio. Activity 11: Ratio Analysis: Debt Ratio. Activity 12: Ratio Analysis: Rate of Return on Net Sales. Activity 13: Ratio Analysis: Asset Turnover. Activity 14: Ratio Analysis: Rate of Return on Total Assets. Activity 15: Test Your Understanding: A Review of Ratio Analysis. Activity 16: Trend Analysis: Income Statement. Activity 17: Trend Analysis: Balance Sheet. Common-Sized Statement Analysis: Income Sheet. Activity 19: Common-Sized Statement Analysis: Balance Sheet. Activity 20: Test Your Understanding: A Review of Trend Analysis and Common-Sized Statements. Activity 21: Internet Research: Using the Forbes Web Site.

    3. Interpreting and Understanding Amounts on Financial Statements.

      Activity 22: Service, Merchandising or Manufacturing Company. Activity 23: Cash and Cash Equivalents. Activity 24: Short-Term Investments. Activity 25: Accounts Receivable. Activity 26: Inventory. Activity 27: Property, Plant, and Equipment. Activity 28: Long-Term Investments. Activity 29: Current and Long-Term Liabilities. Activity 30: Stockholders' Equity. Activity 31: Transactions Affecting Total Assets. Activity 32: Transactions Affecting Total Liabilities. Activity 33: Transactions Affecting Total Stockholders' Equity. Activity 34: Transactions Affecting Net Income. Activity 35: Multiple-Step Income Statement. Activity 36: Which Financial Statement? Activity 37: Test Your Understanding: Interpreting and Understanding Amounts on the Balance Sheet. Activity 38: Test Your Understanding: Interpreting and Understanding Amounts on the Income Statement. Activity 39: Ethics Affecting Financial Statement Amounts: Accounts Receivable. Activity 40: Ethics Affecting Financial Statement Amounts: Inventory. Internet Research: Using the Edgar Database.

    4. Further Your Understanding.

      Activity 42: Recent Business Article. Activity 43: Current Market Interest Rates. Activity 44: Examining Bond Yields. Activity 45: Examining the Prime Rate and Bond Yields: Using The Wall Street Journal. Activity 46: Examining the Bond Market. Activity 47: Examining the Bond Market: Using The Wall Street Journal. Activity 48: Examining the Bond Market: Using the Internet. Activity 49: Examining the Dow Jones Industrial Average: Using The Wall Street Journal. Activity 50: How to Read Stock Quotes: Using The Wall Street Journal. Activity 51: Following the Stock Market: Using The Wall Street Journal or the Internet. Activity 52: Examining the Dow Jones Industrial Average: Using the Internet. Activity 53: Examining Historical Stock Information: Using the Internet.

    5. Analyzing Your Balance Sheet.

      Activity 54: Strategies for Analyzing the Balance Sheet. Activity 55: Understanding Computer Printouts, Classifying Unfamiliar Accounts, and Interpreting Minus Signs: Assets. Activity 56: Understanding Computer Printouts, Classifying Unfamiliar Accounts, and Interpreting Minus Signs: Liabilities and Stockholders' Equity. Activity 57: Trend Analysis. Activity 58: Common-Sized Statements. Activity 59: Industry Norms: Eating Places. Activity 60: Analysis of Vanguard Airlines Inc. Activity 61: Analysis if America Online Inc. Activity 62: Test Your Understanding: Analyzing the Balance Sheet. Activity 63: Internet Research: Using Infoseek.

    6. Analyzing The Income Statement.

      Activity 64: Strategies for Analyzing the Income Statement. Activity 65: Understanding Computer Printouts, Classifying Unfamiliar Accounts, and Interpreting Minus Signs: Income Statement. Activity 66: Analyzing the Income Statement: Using General Motors. Activity 67: Trend Analysis: Using the Walt Disney Company. Activity 68: Common-Sized Statements. Activity 69: Industry Norms: Air Transportation, Scheduled. Activity 70: Analysis of AT&T Corporation. Activity 71: Analysis of Best Buy Company. Activity 72: Test Your Understanding: Analyzing the Income Statement. Activity 73: Internet Research: Using Hoover's Inc.

    7. Analyzing the Statement of Cash Flows.

      Activity 74: Operating Activities. Activity 75: Investing Activities. Activity 76: Financing Activities. Activity 77: Operating, Investing, or Financing? Activity 78: Operating, Investing, or Financing? Activity 79: List Operating, Investing, and Financing Activities. Activity 80: Analysis of Procter & Gamble. Activity 81: Analysis of Saks Holdings Inc. Activity 82: Test Your Understanding: Of the Statement of Cash Flows. Activity 83: Internet Research: Using the AICPA Web Site and Researching Ethics.

    8. Further Radio Analysis.

      Activity 84: Researching Industry Norms. Activity 85: Acid-Test (Quick) Ratio. Activity 86: Days' Sales in Receivables. Activity 87: Accounts Receivable Turnover. Activity 88: Gross Margin Percentage. Activity 89: Inventory Turnover. Activity 90: Times-Interest-Earned. Activity 91: Rate of Return on Total Assents. Activity 92: Rate of Return on Common Shareholders' Equity. Activity 93: Earning Per Share of Common Stock. Activity 94: Earning Per Share of Common Stock. Activity 95: Price/Earnings (PE Ratio). Activity 96: Dividend Yield. Activity 97 Book Value Per Share of Common Stock. Activity 98: Test Your Understanding: A Review of Further Radio Analysis. Activity 99 Internet Research: Using the Fortune Web Site.

    9. Corporate Analysis.

      Activity 100: Part I: Tell Me About Your Company. Activity 101: Part II: Prepare Financial Statements in Condensed Format and a Written Analysis. Activity 102: Part III: Compute Ratios and Compare to Industry Norms. Activity 103: Part IV: Would You Advise a Friend to Invest in this Company?


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