Understanding Financial Statements / Edition 11

by Lyn Fraser, Aileen Ormiston

Overview

A supplementary text for a variety of Business courses, including Financial Statement Analysis, Investments, Personal Finance, and Financial Planning and Analysis

An Analytical Approach to Understanding and Interpreting Business Financial Statements

Understanding Financial Statements improves the student’s ability to translate a financial statement into a meaningful map for business decisions. The material covered in each chapter helps students approach financial statements with enhanced confidence and understanding of a firm’s historical, current, and prospective financial condition and performance. The Eleventh Edition includes new case studies based on existing companies and enhanced learning tools to help students quickly grasp and apply the materials. Fraser and Ormiston presents material in an engaging fashion that helps readers make sense of complex financial information, leading to intelligent (and profitable!) decision-making.

Product Details

ISBN-13:	9780133874037
Publisher:	Pearson Education
Publication date:	12/24/2014
Edition description:	New Edition
Pages:	304
Product dimensions:	7.30(w) x 9.00(h) x 0.50(d)

About the Author

Lyn M. Fraser has taught undergraduate and graduate classes in financial statement analysis at Texas A&M University and has conducted numerous seminars on the subject for executive development and continuing education courses. A Certified Public Accountant, she is the co-author with Aileen Ormiston of Understanding the Corporate Annual Report: Nuts, Bolts, and a Few Loose Screws (Prentice Hall, 2003) and has published articles in the Journal of Accountancy, the Journal of Commercial Bank Lending, the Magazine of Bank Administration, and the Journal of Business Strategies. She has been recognized for Distinguished Achievement in Teaching by the Former Students Association at Texas A&M University and is a member of Phi Beta Kappa. Lyn’s most recent publication is a new mystery novel, “Debits and Credits”, published by Mainly Murder Press in 2014.

Aileen Ormiston teaches in the Accounting Department in the W.P. Carey School of Business at Arizona State University and has taught in the MBA, honors, and online programs. She received her bachelor’s degree in accounting from Michigan State University and a master’s degree in finance from Texas A&M University. Prior to embarking on her teaching career, Aileen worked in cost accounting and also as an auditor in public accounting. She taught accounting and general business courses for 30 years at Mesa Community College, one of 13 universities and colleges that received a grant from the Accounting Education Change Commission. As a result of her pioneering work in changing accounting education, she was the recipient of the “Innovator of the Year” award from the League for Innovation in the Community College. For her service to honors students, Aileen has been named a Phi Theta Kappa mentor.

Read an Excerpt

PREFACE:

Preface

For readers of previous editions anxiously awaiting important updates, I am pleased to report that Aileen Ormiston's hair is also turning grey. My daughter Eleanor has completed three fascinating and challenging years as an analyst for Enron Corporation, and she is now heading back to graduate school for an MBA in international business. The smartest move I have ever made on this book over its many years and editions is to involve Aileen as a co-author, beginning with the fifth edition. She, however, still refers to the text as "the Fraser book," much to the dismay of her students and delight of her co-author.

Uses for the Sixth Edition

Understanding Financial Statements is designed to serve a wide range of readers and purposes, which include:

1. Text or supplementary text for financial statement analysis courses.
2. Supplementary text for accounting, finance, and business management classes which cover financial statement analysis.
3. Study material for short courses on financial statements in continuing education and executive development programs.
4. Self-study guide or course material for bank credit analysis training programs.
5. Reference book for investors and others who make decisions based on the analysis of financial statements.

Features of the Sixth Edition

In revising the text, we have paid close attention to the responses received from faculty who teach from the book, from students who take courses using the book as a primary or supplementary text, and from other readers of the book. Our primary objective remains to convey to readers theconceptual background and analytical tools necessary to understand and interpret business financial statements. Readers and reviewers of earlier editions have commented that the strengths of this book are its readability, concise coverage, and accessibility. We have attempted to retain these elements in the sixth edition.

The sixth edition incorporates the many new requirements and changes in accounting reporting and standards.

• The financial statements of R.E.C. Inc. have been updated to include the following changes in Appendix B: "The Analysis of Segmental Data," has been rewritten to reflect the new segment standard implemented by the FASB since the last edition. As a result of the many changes that impacted chapter 3, the minicases have been updated.
• Three new problems have been added to each chapter and are identified with icons to indicate the problem type: writing skills problems, internet problems', and PETsMART problems 5. The writing skills problems have been added as a result of the emphasis employers place on communication skills. The Internet problems allow the student to explore a variety of Web sites on the Internet. The PETsMART problems offer the opportunity to the student to analyze a real company throughout the use of the text. Information for the PETsMART problems, as well as some of the Internet problems is available on the Prentice Hall Web site: www.prenhall.com/fraser.
• The footnotes provided through the text contain resources that may be used by instructors to form the basis of a reading list for students.
• The sixth edition includes other features of earlier editions that readers have found useful: appendixes on earnings quality, the analysis of segmental data and understanding bank financial statements; self-tests at the ends of chapters, with solutions provided; chapter-end study questions and problems; minicases using real company information, and a glossary of key terms used in the text.
• The Instructor's Manual, which is available as a supplement, contains solutions to study questions, problems, and minicases; a sample course project with assignment outline and resources. New to the sixth edition Instructor's Manual is a test bank for chapters 1 through 5. Both objective and short-answer test questions are included.
• A Web site for the text has been created as mentioned above.
• Power point slides can be downloaded for use in class from this site.

We hope that readers will continue to find material in Understanding Financial Statements accessible, relevant, and useful.

Lyn M. Fraser
Aileen Ormiston

Table of Contents

Brief Contents

• Preface to the Eleventh Edition
• Organization of the Eleventh Edition
• Uses for the Eleventh Edition
• Acknowledgments
• About the Authors

1. Financial Statements: An Overview
2. The Balance Sheet
3. Income Statement and Statement of Stockholders’ Equity
4. Statement of Cash Flows
5. The Analysis of Financial Statements

Appendixes

1. Summary of Financial Ratios
2. Solutions to Self-Tests
3. Glossary

Index

Preface

For readers of previous editions anxiously awaiting important updates, I am pleased to report that Aileen Ormiston's hair is also turning grey. My daughter Eleanor has completed three fascinating and challenging years as an analyst for Enron Corporation, and she is now heading back to graduate school for an MBA in international business. The smartest move I have ever made on this book over its many years and editions is to involve Aileen as a co-author, beginning with the fifth edition. She, however, still refers to the text as "the Fraser book," much to the dismay of her students and delight of her co-author.

Uses for the Sixth Edition

Understanding Financial Statements is designed to serve a wide range of readers and purposes, which include:

1. Text or supplementary text for financial statement analysis courses.
2. Supplementary text for accounting, finance, and business management classes which cover financial statement analysis.
3. Study material for short courses on financial statements in continuing education and executive development programs.
4. Self-study guide or course material for bank credit analysis training programs.
5. Reference book for investors and others who make decisions based on the analysis of financial statements.

Features of the Sixth Edition

In revising the text, we have paid close attention to the responses received from faculty who teach from the book, from students who take courses using the book as a primary or supplementary text, and from other readers of the book. Our primary objective remains to convey to readers theconceptual background and analytical tools necessary to understand and interpret business financial statements. Readers and reviewers of earlier editions have commented that the strengths of this book are its readability, concise coverage, and accessibility. We have attempted to retain these elements in the sixth edition.

The sixth edition incorporates the many new requirements and changes in accounting reporting and standards.

• The financial statements of R.E.C. Inc. have been updated to include the following changes in Appendix B: "The Analysis of Segmental Data," has been rewritten to reflect the new segment standard implemented by the FASB since the last edition. As a result of the many changes that impacted chapter 3, the minicases have been updated.

• Three new problems have been added to each chapter and are identified with icons to indicate the problem type: writing skills problems, internet problems', and PETsMART problems 5. The writing skills problems have been added as a result of the emphasis employers place on communication skills. The Internet problems allow the student to explore a variety of Web sites on the Internet. The PETsMART problems offer the opportunity to the student to analyze a real company throughout the use of the text. Information for the PETsMART problems, as well as some of the Internet problems is available on the Prentice Hall Web site: ... .

• The footnotes provided through the text contain resources that may be used by instructors to form the basis of a reading list for students.

• The sixth edition includes other features of earlier editions that readers have found useful: appendixes on earnings quality, the analysis of segmental data and understanding bank financial statements; self-tests at the ends of chapters, with solutions provided; chapter-end study questions and problems; minicases using real company information, and a glossary of key terms used in the text.

• The Instructor's Manual, which is available as a supplement, contains solutions to study questions, problems, and minicases; a sample course project with assignment outline and resources. New to the sixth edition Instructor's Manual is a test bank for chapters 1 through 5. Both objective and short-answer test questions are included.

• A Web site for the text has been created as mentioned above.

• Power point slides can be downloaded for use in class from this site.

We hope that readers will continue to find material in Understanding Financial Statements accessible, relevant, and useful.

Lyn M. Fraser
Aileen Ormiston

Editorial Reviews

A text on conceptual background and analytical tools for interpreting financial statements. Chapters on the balance sheet, the income statement and retained earnings, statements of cash flow, and analysis of financial statements contain self-tests and answers, study questions and problems, and case studies. This fourth edition includes new appendices on earnings quality, segmental data, and financial ratios, plus coverage of cash flow analysis. Annotation c. Book News, Inc., Portland, OR (booknews.com)

Booknews