How to Read a Financial Report, 9th Edition

How to Read a Financial Report, 9th Edition

by John A. Tracy, Tage C. Tracy
Released February 2020
Publisher(s): Wiley
ISBN: 9781119606468

Read it now on the O’Reilly learning platform with a 10-day free trial.

O’Reilly members get unlimited access to books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial

Book description

The updated new edition of the comprehensive guide to reading and understanding financial reports

Financial reports are used to provide a range of vital information, including an organization’s cash flow, financial condition, and profit performance (aka The Big Three Financial Statements). Financial statements are often complex and extremely difficult to understand for anyone other than accounting and finance professionals. How to Read a Financial Report enablesinvestors, lenders, business leaders, analysts, and managers to read, analyze, and interpret financial accounting reports. Designed specifically for non-specialists, this reader-friendly resource covers the fundamentals of financial reporting in jargon-free English. Topics such as sales revenue & recognition, costs of goods sold, sources & uses of capital/cash, non-cash expenses (e.g., depreciation expense), income tax obligations, understanding profits & financial stability, and financial statement ratios & analysis are covered throughout the book.

Now in its ninth edition, this bestselling guide has been thoroughly revised to reflect changes in accounting and financial reporting rules, current practices, and recent trends. New and expanded content explains managing cash flow, illustrates the deceitful misrepresentation of profits in some financial reports (aka Financial Engineering), and more. Further, end-of-chapter activities help readers learn the intricacies of the balance sheet and cash flow statement, while updated sections address shifts in regulatory standards. Written by two highly experienced experts in financial accounting, this resource: 

  • Enables readers to cut through the noise and focus on what financial reports and financial statements are really saying about a company
  • Clarifies commonly misunderstood aspects of financial reporting and how companies can “financially engineer” operating results
  • Offers comprehensive, step-by-step guidance on analyzing financial reports
  • Provides numerous examples and explanations of various types of financial reports and analysis tools

Table of contents

  1. Cover
  2. PREFACE TO THE NINTH EDITION
  3. Part One FUNDAMENTALS
    1. 1 STARTING WITH CASH FLOWS
      1. Summary of Cash Flows for a Business
      2. What Does Cash Flows Summary Not Tell You?
      3. Profit Is Not Measured by Cash Flows
      4. Cash Flows Do Not Reveal Financial Condition
      5. A Final Note Before Moving On
    2. 2 TWO BEDROCK FINANCIAL STATEMENTS
      1. Need for Financial Information
      2. Reporting Profit Performance: The Income Statement
      3. Reporting Financial Condition: The Balance Sheet
    3. 3 REPORTING CASH FLOWS
      1. Statement of Cash Flows
      2. Cash Versus Accrual Accounting
      3. Financial Tasks of Business Managers
    4. 4 FITTING TOGETHER FINANCIAL STATEMENTS
      1. One Problem in Financial Reporting
      2. Connecting the Dots
  4. Part Two CONNECTIONS
    1. 5 SALES REVENUE AND ACCOUNTS RECEIVABLE
      1. Exploring One Link at a Time
      2. How Sales Revenue Drives Accounts Receivable
      3. Accounting Issues
    2. 6 COST OF GOODS SOLD EXPENSE AND INVENTORY
      1. Holding Products in Inventory Until They Are Sold
      2. Inventory Control
      3. Accounting Issues
    3. 7 INVENTORY AND ACCOUNTS PAYABLE
      1. Acquiring Inventory on the Cuff
      2. Accounting Issues
    4. 8 OPERATING EXPENSES AND ACCOUNTS PAYABLE
      1. Recording Expenses Before They Are Paid
      2. Accounting Issues
    5. 9 OPERATING EXPENSES AND PREPAID EXPENSES
      1. Paying Certain Operating Costs Before They Are Recorded as Expenses
      2. Accounting Issues: Using Prepaid Expenses to Massage the Numbers
    6. 10 DEPRECIATION EXPENSE AND PROPERTY, PLANT, AND EQUIPMENT
      1. Overview of Expense Accounting
      2. Depreciation Expense
      3. Accumulated Depreciation and Book Value of Fixed Assets
      4. Book Values and Current Replacement Costs
      5. Intangible Assets
      6. Accounting Issues
    7. 11 ACCRUING LIABILITY FOR UNPAID EXPENSES
      1. Recording Accrued Liability for Operating Expenses
      2. Bringing Interest Expense Up to Snuff
      3. Accounting Issues
    8. 12 INCOME TAX EXPENSE AND ITS LIABILITY
      1. Taxation of Business Profit
      2. Accounting Issues
    9. 13 NET INCOME AND RETAINED EARNINGS, AND EARNINGS PER SHARE (EPS)
      1. Net Income into Retained Earnings
      2. Earnings per Share (EPS)
      3. Accounting Issues
    10. 14 CASH FLOW FROM OPERATING (PROFIT-SEEKING) ACTIVITIES
      1. Profit Versus Cash Flow from Profit
      2. Changes in Assets and Liabilities That Impact Cash Flow from Operating Activities
      3. The Direct Method for Reporting Cash Flow from Operating Activities
      4. Profit Before the Bottom Line
      5. Accounting Issues
    11. 15 CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
      1. Completing the Statement of Cash Flows
      2. Seeing the Big Picture of Cash Flows
      3. Accounting Issues
  5. Part Three USING FINANCIAL STATEMENTS
    1. 16 FOOTNOTES AND MANAGEMENT DISCUSSIONS
      1. Financial Report Content in Addition to Financial Statements
      2. Financial Statements—Brief Review
      3. Why Footnotes?
      4. Two Types of Footnotes
      5. Management Discretion in Writing Footnotes
      6. Analysis Issues
    2. 17 FINANCIAL STATEMENT RATIOS AND ANALYSIS
      1. Financial Reporting Ground Rules
      2. Financial Statement Preliminaries
      3. Benchmark Financial Ratios
      4. Two Cash Flow Ratios to Chew On
      5. Final Comments
    3. 18 FINANCIAL ENGINEERING
      1. What Financial Engineering Is Not
      2. What Financial Engineering Is
    4. 19 CPAs AND FINANCIAL REPORTS
      1. Certified Public Accountant (CPA)
      2. From Preparation to Audit of Financial Reports by CPAs
      3. Why Audits?
      4. Do Auditors Discover Financial Reporting Fraud?
    5. 20 BASIC QUESTIONS, BASIC ANSWERS
      1. When You Buy Stock Does the Company Get Your Money?
      2. Are Financial Reports Reliable?
      3. Are Some Financial Statements Misleading and Fraudulent?
      4. Should You Take the Time to Compute Financial Statement Ratios?
      5. Why Read Financial Statements, Then, If You Won’t Find Information That Has Been Overlooked by Others?
      6. The Financial Statements and Footnotes of Large Public Companies Would Take Several Hours to Read Carefully: What’s the Alternative?
      7. Is There a Basic Test to Gauge a Company’s Financial Performance?
      8. Do Financial Statements Report the Truth, the Whole Truth, and Nothing but the Truth?
      9. Does Its Financial Report Explain the Basic Profit-Making Strategy or Profit Model of a Business?
      10. Does the Market Price of a Public Company’s Stock Shares Depend Directly and Only on the Information Reported in Its Financial Statements?
      11. Does the Balance Sheet of a Private Business Tell the Market Value of the Business?
      12. Do Books on Investing and Personal Finance Refer to Financial Statements?
      13. A Very Short Summary
    6. ABOUT THE AUTHORS
    7. INDEX
    8. END USER LICENSE AGREEMENT

Product information

  • Title: How to Read a Financial Report, 9th Edition
  • Author(s): John A. Tracy, Tage C. Tracy
  • Release date: February 2020
  • Publisher(s): Wiley
  • ISBN: 9781119606468