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Financial Reporting and Analysis Using Financial Accounting Information

by: Gibson, Charles H.

Financial Reporting and Analysis Using Financial Accounting Information

by: Gibson, Charles H.

ISBN 13:
9780324186437
ISBN 10:
0324186436
Edition: 9th
Format: Hardcover
Copyright: 07/07/2003
Publisher: South-Western College Pub
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Summary

The ninth edition thoroughly involves one with financial statements by using real-world examples. It builds skills in analyzing real financial reports through statements, exhibits, and cases of actual companies. Emphasis is placed on the analysis and interpretation of the end result of financial reporting--financial statements.

CHAPTER 1 INTRODUCTION TO FINANCIAL REPORTING

(32)

Development of Generally Accepted Accounting Principles (GAAP)

(5)

American Institute of Certified Public Accountants (AICPA)

Financial Accounting Standards Board (FASB)

Operating Procedure for Statements of Financial Accounting Standards (SFASs)

FASB Conceptual Framework

Additional Input American Institute of Certified Public Accountants (AICPA)

(1)

Emerging Issues Task Force (EITF)

(1)

A New Reality

(1)

Traditional Assumptions of the Accounting Model

(7)

Business Entity

Going Concern or Continuity

Time Period

Monetary Unit

Historical Cost

Conservatism

Realization

Matching

Consistency Full Disclosure

Materiality

Industry Practices

Transaction Approach

Cash Basis

Accrual Basis

Using the Internet

(1)

Companies' Internet Web Sites

Helpful Web Sites

Summary

(1)

To the Net

(1)

Questions

(2)

Problems

(13)

Case 1-1 Standards Overload?

(1)

Case 1-2 Standard Setting: "A Political Aspect"

(3)

Case 1-3 Standard Setting: "By the Way of the United States Congress"

(1)

Case 1-4 Recognizing Revenue and Related Costs-Part I

(2)

Case 1-5 Recognizing Revenue and Related Costs-Part II

(1)

Case 1-6 Cash Basis-Accrual Basis?

(1)

Case 1-7 Going Concern?

(1)

Case 1-8 Economics and Accounting. The Uncongenial Twins

(1)

Case 1-9 I Often Paint Fakes

(1)

Web Case Thomson Analytics, Business School Edition

(1)

CHAPTER 2 INTRODUCTION TO FINANCIAL STATEMENTS AND OTHER FINANCIAL REPORTING TOPICS

(34)

Forms of Business Entities

(1)

The Financial Statements

(3)

Balance Sheet (Statement of Financial Position)

Statement of Stockholders' Equity (Reconciliation of Stockholders' Equity Accounts)

Income Statement (Statement of Earnings)

Statement of Cash Flows (Statement of Inflows and Outflows of Cash)

Footnotes (Notes)

The Accounting Cycle

(2)

Recording Transactions

Recording Adjusting Entries

Preparing the Financial Statements

Auditor's Report

(5)

Management's Responsibility for Financial Statements

The SEC's Integrated Disclosure System

Proxy

Summary Annual Report

(1)

The Efficient Market Hypothesis

(1)

Ethics

(2)

SEC Requirements-Code of Ethics

Harmonization of International Accounting Standards

(2)

Consolidated Statements

(1)

Accounting for Business Combinations

(1)

Summary

(1)

To the Net

(1)

Questions

(2)

Problems

(16)

Case 2-1 The CEO Retires

(2)

Case 2-2 The Dangerous Morality of Managing Earnings

(4)

Case 2-3 Frequent-Flier Awards-Tick-Tick, Tick-Tick, Tick-Tick

(1)

Case 2-4 International Accounting-Harmonization in Practice

(1)

Case 2-5 Materiality: In Practice

(1)

Case 2-6 Who is Responsible?

(1)

Case 2-7 Safe Harbor

(1)

Web Case Thomson Analytics, Business School Edition

(3)

CHAPTER 3 BALANCE SHEET

(44)

Basic Elements of the Balance Sheet

(26)

Assets

Liabilities

Stockholders' Equity

Quasi-Reorganization

Accumulated Other Comprehensive Income

Equity-Oriented Deferred Compensation

Employee Stock Ownership Plans (ESOPs)

Treasury Stock

Stockholders' Equity in Unincorporated Firms

Statement of Stockholders' Equity

(1)

Problems in Balance Sheet Presentation

(1)

Summary

(1)

To the Net

(1)

Questions

(2)

Problems

(13)

Case 3-1 Balance Sheet Review

103

(3)

Case 3-2 Insight on Liabilities

106

(1)

Case 3-3 Insight on Shareholders' Equity

106

(1)

Case 3-4 Insight on Assets

107

(1)

Case 3-5 Our Principal Asset Is Our People

108

(1)

Case 3-6 Brands Are Dead?

109

(1)

Case 3-7 Advertising-Asset?

109

(1)

Web Case Thomson Analytics, Business School Edition

109

(2)

CHAPTER 4 INCOME STATEMENT

111

(30)

Basic Elements of the Income Statement

112

(2)

Net Sales (Revenues)

Cost of Goods Sold (Cost of Sales)

Other Operating Revenue

Operating Expenses

Other Income or Expense

Special Income Statement Items

114

(8)

(A) Unusual or Infrequent Item Disclosed Separately

(B) Equity in Earnings of Nonconsolidated Subsidiaries

Income Taxes Related to Operations

(D) Extraordinary Items

(E) Cumulative Effect of Change in Accounting Principle

(F) Minority Share of Earnings

Earnings per Share

122

(1)

Retained Earnings

122

(1)

Dividends and Stock Splits

123

(1)

Legality of Distributions to Stockholders

124

(1)

Comprehensive Income

125

(1)

Summary

126

(1)

To the Net

126

(2)

Questions

128

(1)

Problems

128

(13)

Case 4-1 Under the Arch

134

(1)

Case 4-2 Hidden Treasure

135

(1)

Case 4-3 Take My Picture

136

(1)

Case 4-4 The Big Order

136

(1)

Case 4-5 Celtics

137

(1)

Case 4-6 Always Low Prices

138

(1)

Web Case Thomson Analytics, Business School Edition

138

(3)

CHAPTER 5 BASICS OF ANALYSIS

141

(22)

Ratio Analysis

142

(1)

Common-Size Analysis (Vertical and Horizontal)

142

(1)

Year-to-Year Change Analysis

143

(1)

Financial Statement Variation by Type of Industry

144

(1)

Review of Descriptive Information

144

(1)

Comparisons

145

(10)

Trend Analysis

Standard Industrial Classification (SIC) Manual

North American Industry Classification System (NAILS)

Industry Averages and Comparison with Competitors

Caution in Using Industry Averages

Relative Size of Firm

155

(1)

Other Library Sources

155

(3)

Ward's Business Directory

Standard & Poor's Reports

Standard & Poor's Register of Corporations, Directors, and Executives

Standard & Poor's Analyst's Handbook

Standard & Poor's Corporation Records

America's Corporate Families:® The Billion Dollar Directory®

D&B® Million Dollar Directory®

Directory of Corporate Affiliations

Thomas Register of American Manufacturers

Moody's Investors' Services Securities Owner's Stock Guide

The Wall Street Transcript

The Wall Street Journal Index

The Official Index to The Financial Times

Predicasts F & S Index

Reference Book of Corporate Managements

Compact Disclosure

The Users of Finance Statements

158

(1)

Summary

159

(1)

To the Net

159

(1)

Questions

160

(1)

Problems

161

(2)

Web Case Thomson Analytics, Business School Edition

162

(1)

CHAPTER 6 LIQUIDITY OF SHORT-TERM ASSETS: RELATED DEBT-PAYING ABILITY

163

(46)

Current Assets, Current Liabilities, and the Operating Cycle

164

(17)

Cash

Marketable Securities

Receivables

Inventories

Prepayments

Other Current Assets

Current Liabilities

Current Assets Compared with Current Liabilities

181

(4)

Working Capital

Current Ratio

Add-Test Ratio (Quick Ratio)

Cash Ratio

Other Liquidity Considerations

185

(1)

Sales to Working Capital (Working Capital Turnover)

Liquidity Considerations Not on the Face of the Statements

Summary

186

(1)

To the Net

187

(1)

Questions

187

(3)

Problems

190

(19)

Case 6-1 LIFO-FIFO

201

(1)

Case 6-2 Rising Prices, a Time to Switch Off LIFO?

202

(1)

Case 6-3 Moments to Remember

203

(2)

Case 6-4 The Other Side of LIFO

205

(1)

Case 6-5 Network Supreme

206

(2)

Case 6-6 Booming Retail

208

(1)

Web Case Thomson Analytics, Business School Edition

208

(1)

CHAPTER 7 LONG-TERM DEBT-PAYING ABILITY

209

(42)

Income Statement Consideration when Determining Long-Term Debt-Paying Ability

210

(3)

Times Interest Earned

Fixed Charge Coverage

Balance Sheet Consideration when Determining Long-Term Debt-Paying Ability

213

(5)

Debt Ratio

Debt/Equity Ratio

Debt to Tangible Net Worth Ratio

Other Long-Term Debt-Paying Ability Ratios

Special Items that Influence a Firm's Long-Term Debt-Paying Ability

218

(11)

Long-Term Assets Versus Long-Term Debt

Long-Term Leasing

Pension Plan

Postretirement Benefits Other than Pension

Joint Ventures Contingencies

Financial Instruments with Off-Balance-Sheet Risk and Financial instruments with Concentration of Credit Risk

Disclosures About Fair Value of Financial Instruments

Summary

229

(1)

To the Net

230

(1)

Questions

231

(2)

Problems

233

(18)

Case 7-1 Expensing Interest Now and Later

240

(1)

Case 7-2 Consideration of Leases

240

(3)

Case 7-3 Lockout

243

(1)

Case 7-4 Many Employers

244

(1)

Case 7-5 Play It Safe

244

(3)

Case 7-6 Retirement Plans Revisited

247

(1)

Case 7-7 Fair Value of Financial Instruments

248

(1)

Case 7-8 Communications

249

(1)

Web Case Thomson Analytics, Business School Edition

250

(1)

CHAPTER 8 PROFITABILITY

251

(38)

Profitability Measures

252

(10)

Net Profit Margin

Total Asset Turnover

Return on Assets

DuPont Return on Assets

Interpretation Through DuPont Analysis

Variation in Computation of DuPont Ratios Considering Only Operating Accounts

Operating Income Margin

Operating Asset Turnover

Return on Operating Assets

Sales to Fixed Assets Return on Investment (ROI)

Return on Total Equity

Return on Common Equity

The Relationship Between Profitability Ratios

Gross Profit Margin

Trends in Profitability

262

(1)

Segment Reporting

262

(1)

Sales and Marketing

263

(1)

Gains and Losses from Prior Period Adjustments

264

(1)

Comprehensive Income

265

(2)

Pro Forma Financial Information

267

(1)

Interim Reports

268

(1)

Summary

268

(1)

To the Net

269

(1)

Questions

270

(1)

Problems

271

(18)

Case 8-1 Jeff's Self-Service Station

277

(1)

Case 8-2 The Tale of the Segments

278

(1)

Case 8-3 The Story of Starbusks-In Segments

279

(2)

Case 8-4 Tide, Pampers, and Etc.

281

(2)

Case 8-5 Vehicles and Housing

283

(3)

Case 8-6 Cars, Trucks, Etc.

286

(1)

Case 8-7 Shoes, Shoes, Shoes

287

(1)

Web Case Thomson Analytics, Business School Edition

287

(2)

CHAPTER 9 FOR THE INVESTOR

289

(30)

Leverage and Its Effects on Earnings

290

(2)

Definition of Financial Leverage and Magnification Effects

Computation of the Degree of Financial Leverage

Summary of Financial Leverage

Earnings Per Common Share

292

(1)

Price/Earnings Ratio

293

(1)

Percentage of Earnings Retained

294

(1)

Dividend Payout

295

(1)

Dividend Yield

295

(1)

Book Value Per Share

296

(1)

Stock Options (Stock-Based Compensation)

297

(2)

APB Opinion No. 25 Firms

SFRS No. 123 Firms

The Trend

Options-Concluding Comments

Stock Appreciation Rights

299

(2)

Summary

301

(1)

To the Net

302

(1)

Questions

302

(1)

Problems

303

(16)

Case 9-1 Why the Change?

308

(1)

Case 9-2 Stock Split Revisited

309

(3)

Case 9-3 Stock Option Plans (Stock-Based Compensation)

312

(2)

Case 9-4 Food, Food, Food

314

(3)

Case 9-5 Connecting

317

(1)

Web Case Thomson Analytics, Business School Edition

318

(1)

CHAPTER 10 STATEMENT OF CASH FLOWS

319

(46)

Basic Elements of the Statement of Cash Flows

320

(5)

Financial Ratios and the Statement of Cash Flows

325

(4)

Operating Cash Flow/Current Maturities of Long-Term Debt and Current Notes Payable

Operating Cash Flow/Total Debt

Operating Cash Flow per Share

Operating Cash Flow/Cash Dividends

Alternative Cash Flow

329

(1)

Procedures for Development of the Statement of Cash Flows

330

(5)

Summary

335

(1)

To the Net

335

(1)

Questions

336

(1)

Problems

337

(28)

Case 10-1 The Big .Com

349

(2)

Case 10-2 Watch the Cash

351

(1)

Case 10-3 Rapidly Expanding

352

(6)

Case 10-4 The Retail Mover

358

(4)

Case 10-5 Non-Cash Charges

362

(2)

Case 10-6 Sorry-Give it Back

364

(1)

Case 10-7 Cash Movements and Periodic Income Determination

364

(1)

Web Case Thomson Analytics, Business School Edition

365

(1)

SUMMARY ANALYSIS NIKE, INC. (INCLUDES 2002 FINANCIAL STATEMENTS)

365

(78)

Nike-Background Information

368

(8)

Management Discussion and Analysis (See Annual Report) (in Part)

Vertical Common-Size Statement of Income (Exhibit 1)

Horizontal Common-Size Statement of Income (Exhibit 2)

Three-Year Comparison (Exhibit 3)

Ratio Comparison with Selected Competitor (Exhibit 4)

Ratio Comparison with Industry (Exhibit 5)

Other

376

(1)

Summary

376

(1)

Nike 2002 Financial Statements

376

(67)

CHAPTER 11 EXPANDED ANALYSIS

443

(40)

Financial Ratios as Perceived by Commercial Loan Departments

444

(2)

Most Significant Ratios and Their Primary Measure

Ratios Appearing Most Frequently in Loan Agreements

Financial Ratios as Perceived by Corporate Controllers

446

(1)

Most Significant Ratios and Their Primary Measure

Key Financial Ratios Included Corporate Objectives

Financial Ratios as Perceived by Certified Public Accountants

447

(1)

Financial Ratios as Perceived by Chartered Financial Analysts

448

(1)

Financial Ratios Used in Annual Reports

448

(2)

Degree of Conservatism and Quality of Earnings

450

(1)

Inventory

Fixed Assets

Intangible Assets

Pensions

Forecasting Financial Failure

451

(2)

Univariate Model

Multivariate Model

Analytical Review Procedures

453

(1)

Management's Use of Analysis

453

(1)

Use of LIFO Reserves

454

(2)

Graphing Financial Information

456

(1)

Management of Earnings

456

(3)

Summary

459

(1)

To the Net

460

(1)

Questions

460

(2)

Problems

462

(21)

Case 11-1 What Position?

476

(2)

Case 11-2 Accounting Hocus-Pocus

478

(2)

Case 11-3 Turn a Cheek

480

(1)

Web Case Thomson Analytics, Business School Edition

480

(3)

CHAPTER 12 SPECIAL INDUSTRIES: BANKS, UTILITIES, OIL AND GAS, TRANSPORTATION, INSURANCE, REAL ESTATE COMPANIES

483

(40)

Banks

484

(6)

Balance Sheet

Income Statement

Ratios for Banks

Regulated Utilities

490

(5)

Financial Statements

Ratios for Regulated Utilities

Oil and Gas

495

(2)

Successful-Efforts Versus Full-Costing Methods

Supplementary Information on Oil and Gas Exploration, Development, and Production Activities

Cash Flow

Transportation

497

(6)

Financial Statements

Ratios

Insurance

503

(4)

Balance Sheet Under GAAP

Income Statement Under GAAP

Ratios Real Estate Companies

507

(1)

Summary

507

(1)

To the Net

508

(1)

Questions

509

(2)

Problems

511

(12)

Case 12-1 Allowance for Funds

514

(3)

Case 12-2 Results of Operations for Oil and Gas Producing Activities

517

(1)

Case 12-3 Summary of Loan Loss Experience

518

(2)

Case 12-4 You Can Bank on It

520

(2)

Case 12-5 You're Covered

522

(1)

Web Case Thomson Analytics, Business School Edition

522

(1)

CHAPTER 13 PERSONAL FINANCIAL STATEMENTS AND ACCOUNTING FOR GOVERNMENTS AND NOT-FOR-PROFITS ORGANIZATIONS

523

(34)

Personal Financial Statements

524

(5)

Form of the Statements

Suggestions for Reviewing the Statement of Financial Condition

Suggestions for Reviewing the Statement of Changes in Net Worth

Illustration of Preparation of the Statement of Financial Condition

Illustration of Preparation of the Statement of Changes in Net Worth

Accounting for Governments

529

(4)

Accounting for Not-for-Profit Organizations Other Than Governments

533

(9)

1. SFRS No. 93, "Recognition of Depreciation by Not-for-Profit Organizations"

2. SFRS No. 116, "Accounting for Contributions Received and Contributions Made"

3. SFRS No. 117, "Financial Statements of Not-for-Profit Organizations"

4. SPAS No. 124, "Accounting for Certain Investments Held by Not-for-Profit Organizations"

Applicability of GAAP to Not-for-Profit Organizations

Budgeting by Objectives and/or Measures of Productivity

Summary

542

(1)

To the Net

543

(1)

Questions

543

(1)

Problems

544

(13)

Case 13-1 Governor Lucas-This is Your County

548

(6)

Case 13-2 My Mud Hens

554

(1)

Case 13-3 Jeep

554

(3)

GLOSSARY

557

(22)

BIBLIOGRAPHY

579

(10)

INDEX

589

Amazon no longer offers textbook rentals. We do!

Financial Reporting and Analysis Using Financial Accounting Information

Financial Reporting and Analysis Using Financial Accounting Information

9780324186437

0324186436

Summary

Table of Contents

Supplemental Materials

Write a Review

Amazon no longer offers textbook rentals. We do!

Financial Reporting and Analysis Using Financial Accounting Information

Financial Reporting and Analysis Using Financial Accounting Information

9780324186437

0324186436

Summary

Table of Contents

Supplemental Materials

Write a Review

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