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International Financial Statement Analysis Workbook, 2nd Edition by Michael A. Broihahn CFA, Anthony T. Cope CFA, Wendy L. Pirie CFA, Elaine Henry CFA, Thomas R. Robinson CFA

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CHAPTER 17

INTEGRATION OF FINANCIAL STATEMENT ANALYSIS TECHNIQUES

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Demonstrate the use of a framework for the analysis of financial statements given a particular problem, question, or purpose (e.g., valuing equity based on comparables, critiquing a credit rating, obtaining a comprehensive picture of financial leverage, evaluating the perspectives given in management’s discussion of financial results).
  • Identify financial reporting choices and biases that affect the quality and comparability of companies’ financial statements, and illustrate how such biases affect financial decisions.
  • Evaluate the quality of a company’s financial data, and recommend appropriate adjustments to improve quality and comparability with similar companies, including adjustments for differences in accounting rules, methods, and assumptions.
  • Predict the impact on financial statements and ratios, given a change in accounting rules, methods, or assumptions.
  • Analyze and interpret the effects of balance sheet modifications, earnings normalization, and cash flow statement related modifications on a company’s financial statements, financial ratios, and overall financial condition.

SUMMARY OVERVIEW

The three case studies demonstrate the use of financial analysis in decision making. Each case is set in a different type of industry: manufacturing, service, and financial service. The different focus, purpose, and context for each ...

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