Intermediate Accounting, Thirteenth Edition

Chapter 5. BALANCE SHEET AND STATEMENT OF CASH FLOWS

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

• 
• 
• 
• 
• 
• 
• 
• 
• 

"There Ought to Be a Law"

As one manager noted, "There ought to be a law that before you can buy a stock, you must be able to read a balance sheet." We agree, and the same can be said for a statement of cash flows.

Krispy Kreme Doughnuts provides an example of how stunning earnings growth can hide real problems. Not long ago the doughnut maker was a glamour stock with a 60 percent earnings per share growth rate and a price-earnings ratio around 70. Seven months later its stock ...