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 ...
