International Financial Statement Analysis Workbook, 3rd Edition

CHAPTER 18 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 explain how such biases may 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 standards, methods, and assumptions;
• evaluate how a given change in accounting standards, methods, or assumptions affects financial statements and ratios;
• analyze and interpret how balance sheet modifications, earnings normalization, and cash flow statement related modifications affect 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 ...