How to read a financial report: wringing vital signs out of the numbers

200 Pages·2020·1.351 MB·English

by  Tracy, John A., Tracy, Tage C

HOW TO READ
A FINANCIAL REPORT
Essential Information for Entrepreneurs, Lenders, Investors, Analysts, and Management
A l l N e w N I N T H E D I T I O N
OVER
350,000
SOLD!
Wringing Vital Signs Out of the Numbers
John A. Tracy Tage C. Tracy
and

How to Read a Financial RepoRt
H o w t o R e a d a
w R i n g i n g V i t a l S i g n S o u t o F
ninth edition
F i n a n c i a l R e p o R t
t H e n u m b e R S
JoHn a. tRacy tage c. tRacy
and
Cover Design: Wiley
Cover Illustration: Wiley
Copyright © 2020 by John A. Tracy and Tage C. Tracy. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
The Eighth Edition of How to Read a Financial Report: Wringing Vital Signs Out of the Numbers was published by John Wiley & Sons, Inc, in 2014.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Names: Tracy, John A., author. | Tracy, Tage C., author.
Title: How to read a financial report: wringing vital signs out of the
numbers / John A. Tracy and Tage C. Tracy.
Description: Ninth edition. | Hoboken, New Jersey : Wiley, [2020] |
Includes index.
Identifiers: LCCN 2019035972 (print) | LCCN 2019035973 (ebook) | ISBN
9781119606468 (paperback) | ISBN 9781119606451 (Adobe PDF) | ISBN
9781119606482 (epub)
Subjects: LCSH: Financial statements.
Classification: LCC HF5681.B2 T733 2020 (print) | LCC HF5681.B2 (ebook) |
DDC 657/.3—dc23
LC record available at https://lccn.loc.gov/2019035972
LC ebook record available at https://lccn.loc.gov/2019035973
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
Contents
List of Exhibits vii
Preface to the Ninth Edition ix
Part One—Fundamentals
1 starting with Cash Flows 3
2 two Bedrock Financial statements 11
3 Reporting Cash Flows 21
4 Fitting together Financial statements 27
Part Two—Connections
5 sales Revenue and Accounts Receivable 37
6 Cost of Goods sold expense and Inventory 43
7 Inventory and Accounts Payable 49
8 operating expenses and Accounts Payable 55
9 operating expenses and Prepaid expenses 61
10 Depreciation expense and Property, Plant,
and equipment 67
11 Accruing Liability for Unpaid expenses 77
12 Income tax expense and Its Liability 83
13 net Income and Retained earnings,
and earnings per share (ePs) 89
14 Cash Flow from operating (Profit-seeking)
Activities 97
15 Cash Flows from Investing and Financing
Activities 107
Part Three—Using Financial Statements
16 Footnotes and Management Discussions 117
17 Financial statement Ratios and Analysis 129
18 Financial engineering 147
19 CPAs and Financial Reports 155
20 Basic Questions, Basic Answers 163
About the Authors 179
Index 181
vi Contents
LIST OF EXHIBITS
Exhibit 1.1 Summary of Cash Flows During Year 5
Exhibit 2.1 Income Statement for Year 12
Exhibit 2.2 Year-End Balance Sheets 13
Exhibit 2.3 Single-Step Income Statement 15
Exhibit 3.1 Statement of Cash Flows for Year 22
Exhibit 3.2 Revenue and Expenses: Cash Flows Versus
Accrual Amounts 24
Exhibit 4.1 Connecting Annual Income Statement
with Year-End Balance Sheet 30
Exhibit 4.2 Connecting Balance Sheet Changes with
Statement of Cash Flows 31
Exhibit 5.1 Sales Revenue and Accounts Receivable 38
Exhibit 6.1 Cost of Goods Sold Expense and Inventory 44
Exhibit 7.1 Inventory and Accounts Payable 50
Exhibit 8.1 Selling, General, and Administrative
Expenses and Accounts Payable 56
Exhibit 9.1 Selling, General, and Administrative
Expenses and Prepaid Expenses 62
Exhibit 10.1 Property, Plant, and Equipment,
Depreciation Expense, and Accumulated
Depreciation 69
Exhibit 11.1 Accruing Unpaid Expenses 78
Exhibit 12.1 Income Tax Expense and Income
Tax Payable 84
Exhibit 13.1 Net Income and Retained Earnings;
Earnings per Share (EPS) 91
Exhibit 14.1 Cash Flow from Operating
(Profit-Making) Activities 99
Exhibit 14.2 Direct Method Format for Reporting
Cash Flow from Operating Activities
in the Statement of Cash Flows 104
Exhibit 15.1 Cash Flows from Investing and
Financing Activities 109
Exhibit 17.1 External Financial Statements of
Business (Without Footnotes) 132
viii List of Exhibits