The Comprehensive Guide on How to Read a Financial Report Wringing Vital Signs Out of the Numbers

List of Exhibits ix

Preface xv

Part One—Financial Report Fundamentals

1 Financial Statement Basics: The Real Meat and Potatoes of Financial Reports 3

2 Starting with Cash Flows 13

3 Mastering the Balance Sheet 21

4 Understanding Profit 31

5 Profit Isn’t Everything and All Things 43

Part Two—Working Capital Connections

6 Our Case Study—Company Introductions 55

7 Sales Revenue, Trade Accounts Receivable, and Deferred Revenue 65

8 Cost(s) of Goods Sold Expense and Inventory 77

9 Inventory and Accounts Payable 89

10 Operating Expenses and Accounts Payable 99

11 Accruing Liabilities for Incurred but Unpaid Expenses 109

12 Income Tax Expense—A Liability and Asset? 117

Part Three—Financial Capital Connections and Cash Flows

13 Our Case Study—Company Updates and Assessments 129

14 Long-Term Assets and Depreciation, Amortization, and Other Expenses 139

15 Long-Term Liabilities, Interest, and Other Expenses 151

16 Net Income, Retained Earnings, Equity, and Earnings per Share (EPS) 163

17 Cash Flow from Operating (Profi t-Making) Activities 173

18 Cash Flows from Investing and Financing Activities 183

Part Four—Financial Report Analysis

19 Expansion and Contraction Impacts on Cash Flow 195

20 What Is EBITDA and Why Is It Important? 211

21 Financial Statement Footnotes—The Devil’s in the Details 217

22 Financial Statement Ratios—Calculating and Understanding 229

23 Profit Analysis for Business Managers 245

24 Our Case Study and the Moral of the Story—The Good, the Bad, and the Ugly 259

Part Five—Financial Report Truthfulness

25 Choosing Accounting Methods and Massaging the Numbers 273

26 Audits of Financial Reports 285

27 Small Business Financial Reporting 299

28 Basic Questions, Basic Answers, No BS 309

About the Authors 319

About the Companion Website 321

Index 323