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How to Read a Financial Report: Wringing Vital Signs Out of the Numbers by John A. Tracy

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INDEX
10-K (annual fi nancial report fi led with Securities and Exchange
Commission), 159
Accelerated depreciation, 60
Account (basic recordkeeping unit), 15
Accounting fraud, 54–55, 153, 158, 165, 167, 171, 174, 175,
179, 182, 189–190, 195
Accounting functions, 140
Accounting methods, 31, 105, 162–164, 168–170,
179, 195
Accounting profession, 8
Accounting standards, 153, 155, 156, 162, 180, 185, 189; see also
Generally accepted accounting principles (GAAP)
Accounting system, 140, 162, 175
Accounts payable, 40–43, 46–48, 58, 69, 88, 90, 112
Accounts receivable turnover ratio, 30
Accounts receivable, 23, 28–31, 87, 90, 112, 130,
166–167, 191
Accrual-basis accounting, 7, 47, 58, 91
Accrued expenses payable, 68–70, 88, 90, 112
Accrued interest payable, 70
Accumulated depreciation, 16, 61
Acid test ratio, 130
Adjusting entries, 166
Adverse audit opinion, 183–184
Amortization expense, 16–17, 63, 90, 105, 112
Arthur Andersen, v, 174
Asset turnover ratio, 137
Asset write down, 112, 121
Assets (in general), 8, 15, 28, 81
Audit committee, 174, 184, 185
Audit report, 104, 180–184, 189
Audit (of fi nancial reports by CPA), v, 105, 107, 174–182,
185, 190
Average cost method, 37
Bad debts expense, 31, 163
Balance (dollar amount of account), 15, 35
Balance sheet, 10, 11, 15–17, 18, 20, 23, 55, 102–103, 193, 195
Basic earnings per share, 134–135
Berkshire Hathaway, 158, 193
Big Four (CPA fi rms), 103, 174
Book value of assets, 61–62
Book value per share, 134, 193
Breakeven point, 147
Buffett, Warren, 158, 193
Burn rate (of cash), 121
bindex.indd 197bindex.indd 197 3/2/09 11:02:18 AM3/2/09 11:02:18 AM
198 Index
Capital expenditures, 95–96
Capital stock, 17, 80, 152
Capitalization structure, 152
Cash balance, 6, 96, 166–167
Cash basis accounting, 58
Cash fl ow from operating (profi t-making) activities, 23, 86–90,
91, 95, 112, 152, 170
Cash fl ow from profi t. See Cash fl ow from operating activities
Cash fl ow in decline, 118–120
Cash fl ow in growth, 115–117
Cash fl ow in steady-state, 113–114
Cash fl ow per share, 98
Cash fl ow ratios (lack of), 127
Cash fl ow(s), vi, 4–8, 20, 29, 48, 52, 53, 60, 69, 86–89, 90,
95–97, 112–122, 164
Cash fl ows, statement of, 10, 12, 18, 20, 86–89, 91, 94, 96–97,
102–103, 127, 189, 192
Caterpillar Inc., 105
Certifi ed public accountant (CPA), 103, 176–177; see also Audit;
Audit report
Chief fi nancial offi cer (CFO), 20, 168
Clean (unqualifi ed) audit report, 181–189
Codifi cation of generally accepted accounting principles
(GAAP), 155
Condensed fi nancial reports, 191
Consistency of accounting methods, 169, 183
Consolidated fi nancial statements, 106
Controller (chief accounting offi cer), 168, 176
Cooking the books, 165, 167, 175; see also
Accounting fraud
Corporation, 74
Cost accounting, 37
Cost center, 142–143
Cost of goods sold expense, 13, 14, 23, 34–36, 37, 58, 163, 168
Current assets, 15, 16, 129–139
Current liabilities, 16, 17, 129–130
Current ratio, 129–130
Current replacement costs of assets, 62
Debt to equity ratio, 130–131
Depreciation and depreciation expense, 14, 16, 58–61, 64–65,
87–88, 90, 105, 112, 114, 144, 163, 168
Diluted earnings per share, 135, 157
Direct costs and expenses, 37, 58
Direct method (of reporting cash fl ow from operating
activities), 89
Disclaimer of audit opinion, 184
Disclosure (in fi nancial reports), 37, 42, 49, 59, 64, 71, 82,
104, 157, 159, 179, 180, 192, 195
Dividend yield, 137
Dividends, 80, 94, 85, 96, 98–99, 134, 190
Dow Jones Industrial Average, v
Earnings before interest and income tax (EBIT), 13, 131, 145
Earnings before interest, tax, depreciation, and amortization
(EBITDA), 90, 131
Earnings per share (EPS), 13, 82, 83, 134–135; see also Basic
earnings per share; Diluted earnings per share
Earnings statement, 10. See Income statement
EDGAR (Securities and Exchange Commission database), 159
Embezzlement, 179
Enron, v, 174, 185
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