Financial Statement Analysis : A Global Perspective
Editorial Reviews
Book Description
Investors, creditors, employees, customers, suppliers and auditors all have an interest in assessing the financial performance and position of enterprises. For example, consider an investor with an interest in purchasing shares of stock in a publicly traded company or a bank considering whether or not to extend a loan to a closely held business. To make these and other decisions requires an ability to read, analyze, and interpret the financial reports of an enterprise. Financial Statement Analysis: A Global Perspective, is a primer in financial statement analysis and, as the title indicates, presents a global perspective. This text will help you understand and enable you to use an enterprise's financial statements and other reports in making investment and credit decisions or to support others making such decisions. Throughout this text, we shall refer to users of financial reports as financial analysts. The need for thorough analysis of financial reports has been highlighted in the media recently by highly publicized financial failures such as Enron and WorldCom. In some cases, financial analysts brought to light problems in their analysis of company financial statements. In other cases, the reported financial statements themselves did not properly portray the risks and performance of the enterprise. While an analysis of financial statements may not uncover all such events before they occur, it can alert the analyst to areas of concern and enable users of financial statements to ask appropriate questions of management. The need for this text is clear. Just look at the rapidly growing interest in financial statement analysis as a profession, evidenced by a record number of registrants for all three levels of the Association for Investment Management and Research's (AIMR) Chartered Financial Analyst (CFA ; ) examination in Spring 2000. AIMR's Candidate Body of Knowledge requires an extensive understanding of financial statement analysis. Further evidence is seen in the rapid globalization of financial markets. Financial analysts must understand accounting principles used by companies in their home country and those used by companies in other countries. This has been especially difficult in prior years, when standards have differed from individual country to country. Fortunately, International Accounting Standards (IAS) are gaining acceptance along with this globalization. The European Union recently announced that it will adopt IAS for all companies listed in the EU capital markets in 2005. Australia has announced similar plans. The recently reconstituted International Accounting Standards Board (IASB) and the United States Financial Accounting Standards Board (FASB) along with their predecessor organizations, have been integral to the development of high-quality accounting standards. In the Fall of 2002, these two organizations announced an agreement to reduce differences between the two sets of standards. This textbook takes a global perspective in presenting both IAS and United States (U.S.) Generally Accepted Accounting Principles (GAAP), pointing out the similarities, differences, and implications for analysis and valuation. Geared primarily to upper-level undergraduate and graduate business students, Financial Statement Analysis: A Global Perspective, is designed for use in a stand-alone financial statement analysis course (either in accounting or finance), but could also be used as the primary text in an MBA financial accounting course. While the ideal student will have already taken one prior accounting course, the text is written so that students with no accounting background can read and understand the book, using the background material provided in the first four chapters. Since the book is written from an analysis perspective, even students with a strong accounting background will find each chapter interesting and informative. The text is also designed to be used by individuals with an interest in becoming financial analysts and is suitable for use as a reference by financial analysts, portfolio managers, and other investment professionals. FEATURES Global perspective. The text presents both IAS and U.S. GAAP. Elimination of debits and credits. Our presentation of financial statement analysis does not require an understanding of debits and credits (that is, the mechanics of recording transactions), which cause great consternation for many students. Familiarity with debits and credits is not necessary to understand financial statements or perform analysis. Financial statement analysis perspective. Unlike many books that emphasize the accounting perspective, this text is written from the perspective of the user of financial statements. The focus of this text is on the analysis and use of financial reports. The text is written from the perspective of an analyst and information is presented in a user-friendly, readable manner. Learning objectives. Each chapter begins with a set of learning objectives to focus faculty and students on key concepts. Practical application. The book presents practical application of financial statement analysis using two companies (Motorola and Nokia) throughout. Additional "real life" application examples are used throughout the text. Clear organization. The text is organized to take the student step-by-step through the financial statement analysis process in the first ten chapters, from understanding the financial statements to valuation. The final eight chapters present advanced topics from which faculty members and students can select to go beyond the basics of analysis. Extensive review problems. At the end of each chapter there are problems designed to reinforce each chapter's topics. Many of these problems have been reproduced from AIMR CFA examination released questions and sample examinations and are denoted by the CFA symbol. In addition, each chapter has a longer case derived from real company financial statements that can be used for class discussion or student projects. ORGANIZATION Part 1 of this text provides the concepts necessary to understand and interpret financial statements. Throughout this section, the text uses financial statements of Motorola (prepared under U.S. GAAP) and Nokia (prepared under IAS) to demonstrate the application of the principles presented. Chapter 1 is an introduction to financial statement analysis. Chapter 2 presents the income statement, which measures the profitability of a company for a period of time. Chapter 3 demonstrates how to read and interpret company balance sheets, which provide a snapshot of their financial position. Chapter 4 provides an understanding of the statement of cash flows and its importance in understanding the sources and uses of cash by a company. Part 2 provides analysis techniques that enable the analyst to further understand the relative position and performance of a company. Chapter 5 covers common size analysis of company financial statements. Chapter 6 presents ratio analysis, a specific form of common size analysis. Chapter 7 demonstrates how to analyze company information for the purposes of extending credit. Chapter 8 presents similar methods for analyzing equity investments. Chapter 9 provides industry-specific analysis techniques. Chapter 10 presents valuation techniques used by analysts to make an investment recommendation. Part 3 provides more detailed information on particular aspects of financial statements. Chapter 11 presents analysis of inventories including how to adjust inventory methods for comparability. Chapter 12 shows how to evaluate long-term investments. Chapter 13 examines the impact of intercorporate investments, including Special Purpose Entities. Chapter 14 presents analysis of income taxes and employee stock options. Chapter 15 shows how to understand and evaluate pensions and other employee benefit plans. Chapter 16 explains accounting for derivatives and discusses the impact on analysis. Chapter 17 examines the impact on financial statements of multinational operations. Chapter 18 presents techniques of evaluation for business segments and overall corporate performance, including residual income measures. The text is structured so that one chapter can be covered per week in a semester-based course. The faculty can select those chapters from the advanced section that are suitable to their teaching style and the student population, using 14 or 15 of the 18 chapters. The entire book can be covered in a semester for those desiring a more rigorous, professional analyst-oriented course. The text can also be used over two courses, with Chapters 1 through 10 being covered in detail in the first course, and the second course using a case approach on the advanced topics from Chapters 11 through 18. SUPPLEMENTS Prentice Hall Companion Website. A one-stop site dedicated to both faculty and student needs. Electronic versions of the Solutions Manual, Instructor's Manual, Power Point Slides, Test Item File, and more will be available for easy download for faculty. Solutions Manual. Provides answers to all end-of-chapter material. Instructor's Manual. A guide for faculty, including recommended ways to use Financial Statement Analysis: A Global Perspective in the classroom. Power Point Slides. A ready-to-use slide show to accompany class lectures. Fully editable: use "as-is" or manipulate them to best fulfill your teaching needs. Test Item File. A comprehensive selection of pre-made testing material ranging from easy to difficult. A customizable electronic version is also available.
From the Back Cover
Robinson, Munter, and Grant's Financial Statement Analysis: A Global Perspective is designed especially for users of financial statements.
Financial Statement Analysis : A Global Perspective,Thomas R. Robinson,Paul Munter,Julia Grant,Prentice Hall,0130601217,Accounting - General,Business & Economics,Business / Economics / Finance,Business/Economics,Financial statements,Investments & Securities - General,Business & Economics / Accounting / General
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