How to Read a Financial ReportWringing Vital Signs Out of the Numbers
An updated new edition of the comprehensive guide to reading and understanding financial reports Financial reports provide vital information to investors, lenders, and managers. Yet, the financial statements in a financial report seem to be written in a foreign language that only accountants can understand. This new Eighth Edition of How to Read a Financial Report breaks through that language barrier, clears away the fog, and offers a plain-English user's guide to financial reports. This updated edition features new information on the move toward separate financial and accounting reporting standards for private companies, the emergence of websites offering financial information, pending changes in the auditor's report language and what this means to investors, and requirements for XBRL tagging in reporting to the SEC, among other topics. Makes it easy to understand what financial reports really say Updated to include the latest information financial reporting standards and regulatory changes Written by an author team with a combined 50-plus years of experience in financial accounting With this new edition of How to Read a Financial Report, investors will find everything they need to fully understand the profit, cash flow, and financial condition of any business.
List of Exhibits ix Preface to the Eighth Edition xiii Part One—Fundamentals 1 Starting with Cash Flows 3 2 Three Financial Statements 11 3 Profit Accounting 23 4 Profit Isn’t Everything 33 Part Two—Connections 5 Sales Revenue and Accounts Receivable 43 6 Cost of Goods Sold Expense and Inventory 49 7 Inventory and Accounts Payable 55 8 Operating Expenses and Accounts Payable 61 9 Operating Expenses and Prepaid Expenses 67 10 Depreciation Expense and Property, Plant, and Equipment; Intangible Assets 73 11 Accruing the Liability for Unpaid Expenses 83 12 Income Tax Expense and Its Liability 89 13 Net Income and Retained Earnings; Earnings per Share (EPS) 95 Part Three—Cash Flow 14 Cash Flow from Operating (Profi t-Making) Activities 103 15 Cash Flows from Investing and Financing Activities 111 16 Growth and Decline Impacts on Cash Flow 119 Part Four—Analysis 17 Footnotes to Financial Statements 133 18 Financial Statement Ratios 143 19 Profit Analysis for Business Managers 157 Part Five—Truthfulness 20 Choosing Accounting Methods and Massaging the Numbers 171 21 Audits of Financial Reports 181 22 Basic Questions, Basic Answers 193 23 Small Business Financial Reporting 209 About the Authors 215 Index 217
JOHN A. TRACY is a successful financial accounting author. In addition to all eight editions of this book, he is the author of a number of books including the best-selling Accounting For Dummies. TAGE C. TRACY heads a consulting firm specializing in providing executive-level financial and accounting management resources on a project and/or interim basis. He has worked with companies in an array of industries ranging from web-based technology/solutions to manufacturing to retail to professional service organizations and finance. In addition, Tage has co-authored Cash Flow For Dummies and Small Business Financial Management Kit For Dummies with his father.
Whether you're a manager attempting to get a clear picture of your company's performance, an investor trying to determine if a business is a sound investment, or a lender who needs to measure an organization's creditworthiness, the information contained in a financial report is the most valuable source of information at your disposal. Now only if it was written in a language you could read! For more than thirty years, the number-one resource professionals have turned to for help in cutting through the haze of