CHAPTER1 Financial Statements：An Overview 1
Map or Maze 1
Organization 2
Usefulness 4
Volume of Information 4
The Financial Statements 5
Notes to the Financial Statements 5
Auditor s Report 9
Other Required Information 14
Pandora（a.k.a“PR Fluff”） 15
Complexity 16
Alphabet Soup 16
Mythical Mountain 18
Quality of Financial Reporting 23
Accounting Policies,Estimates—Choices and Changes 23
Timing of Revenue and Expense Recognition 25
Discretionary Items 26
Nonrecurring and Nonoperating Items 27
Impact of Inflation 28
Missing and Hard-to-Find Information 31
Self-Test 33
Study Questions and Problems 36
La-Z-Boy Mini-Case 37
Chambers Development Company,Inc.Mini-Case 42
CHAPTER2 The Balance Sheet 49
Financial Condition 49
Consolidation 50
Balance Sheet Date 50
Comparative Data 50
Assets 50
Current Assets 50
Cash and Marketable Securities 52
Accounts Receivable 53
Inventories 55
Inventory Accounting Methods 56
Prepaid Expenses 58
Property,Plant,and Equipment 59
Other Assets 61
Liabilities 61
Current Liabilities 61
Accounts Payable 62
Notes Payable 62
Current Maturities of Long-Term Debt 63
Accrued Liabilities 63
Unearned Revenue or Deferred Credits 63
Deferred Federal Income Taxes 64
Long-Term Debt 66
Other Liabilities 66
Retained Earnings 67
Additional Paid-In Capital 67
Common Stock 67
Stockholders Equity 67
Other Equity Accounts 68
Other Balance Sheet Items 69
Self-Test 69
Study Questions and Problems 73
Intel Corporation Mini-Case 75
The Rival Company Mini-Case 80
CHAPTER3 The Income Statement and Statement of Retained Earnings 86
The Income Statement 87
Net Sales 89
Cost of Goods Sold 90
Gross Profit 91
Operating Expense 91
Depreciation and Amortization 92
Operating Profit 93
Earnings Before Income Taxes 94
Other Income（Expense 94
Net Earnings 95
Earnings Per Common Share 95
The Statement of Retained Earnings 96
Statement of Shareholders Equity 97
Other Issues—Cost vs.Equity Method 99
Earnings Quality,Inflation,Cash Flow,Segmental Accounting 100
Self-Test 101
Study Questions and Problems 105
Time Warner Mini-Case 107
IBM Corporation Mini-Case 110
CHAPTER4 Statement of Cash Flows 114
Preparing a Statement of Cash Flows 116
Calculating Cash Flow From Operating Activities 121
Direct Method 121
Indirect Method 123
Cash Flow from Financing Activities 125
Cash Flow from Investing Activities 125
Change in Cash 126
Analyzing the Statement of Cash Flows 126
Cash Flow from Operations 126
Nocash Corporation 128
Help from a Statement of Cash Flows 130
Summary Analysis of the Statement of Cash Flows 131
Supplement to Chapter4:Adjusting Net Income from Accrual to Cash—An Illustration 133
Self-Test 135
Study Questions and Problems 139
PetsMart Mini-Case 145
Royal Appliance Mfg.Co.and Subsidiaries Mini-Case 147
CHAPTER5 The Analysis of Financial Statements 150
Objectives of the Analysis 150
Sources of Information 151
Auditor s Report 151
Other Sources 152
Form 10-K and Form 10-Q 152
Management s Discussion and Analysis 152
Supplementary Schedules 152
Tools and Techniques 153
Common Size Financial Statements 154
Key Financial Ratios 156
Liquidity Ratios:Short-Term Solvency 157
Activity Ratios:Asset Liquidity,Asset Management Efficiency 160
Leverage Ratios:Debt Financing and Coverage 163
Profitability Ratios:Overall Efficiency and Performance 165
Analyzing the Data 167
Background:Economy,Industry,and Firm 168
Short-Term Liquidity 169
Net Trade Cycle 171
Capital Structure and Long-Term Solvency 172
Example of Financial Leverage 172
Operating Efficiency and Profitability 175
Ratio Analysis summary 177
Projections,Pro Formas,and Market Ratios 178
Summary of Analysis 180
Map 181
Self-Test 181
Study Questions and Problems 186
First Team Sports,Inc.Mini-Case 200
L.A.Gear,Inc.Mini-Case 207
Appendixes 213
A A Guide to Earnings Quality 213
B The Analysis of Segmental Data 227
C Understanding Bank Financial Statements 235
D Solutions to Self-Tests 245
E Summary of Financial Ratios 247
F Glossary 249
Index 261