Financial Accounting for MBAs, 8e

by Easton, Wild, Halsey, McAnally

| ISBN: 978-1-61853-358-6 | Copyright 2021

Click here to preview

Instructor Requests

Digital Exam/Desk Copy Print Exam/Desk Copy Ancillaries
Tabs

Welcome to Financial Accounting for MBAs 8e!

Welcome to the Eighth Edition of Financial Accounting for MBAs. Our main goal in writing this book was to satisfy the needs of todays business manager by providing the most contemporary, relevant, engaging, and user‑oriented book available. This book is the product of extensive market research including focus groups, market surveys, class tests, manuscript reviews, and interviews with faculty from across the country. We are grateful to students and faculty who used the previous editions and whose feedback greatly benefited this new edition.

Target Audience

Financial Accounting for MBAs is intended for use in full‑time, part‑time, executive, and working professional MBA programs that include a financial accounting course as part of the curriculum, and one in which managerial decision making and analysis are emphasized. This book easily accommodates mini‑courses lasting several days as well as extended courses lasting a full semester. The book and its resources are well suited for any instructional mode: face‑to‑face, online, flipped classroom, or any combination of delivery modes.

Innovative Approach

Financial Accounting for MBAs is managerially oriented and focuses on the most salient aspects of accounting. It helps MBA students learn how to read, analyze, and interpret financial accounting data to make informed business decisions. This text makes financial accounting engaging, relevant, and contemporary. To that end, it consistently incorporates real company data, both in the body of each module and throughout assignment material.

Flexible Structure

The MBA curricula, instructor preferences, and course lengths vary across colleges. Accordingly and to the extent possible, the 13 modules that make up Financial Accounting for MBAs were designed independently of one another. This modular presentation enables each college and instructor to “customize” the book to best fit the needs of their students. Our introduction and discussion of financial statements constitute Modules 1, 2, and 3. Module 4 presents the analysis of financial statements with an emphasis on analysis of operating profitability. Modules 5 through 10 highlight major financial accounting topics including assets, liabilities, equity, and offbalancesheet financing. Module 11 details the process for preparing and analyzing the statement of cash flow. Module 12 explains forecasting financial statements and Module 13 introduces basic valuation models. At the end of each module, we present an ongoing analysis project that can be used as a guide for an independent project. Like the rest of the book, the project is independent across modules. At the end of the book, we include several useful resources. Appendix A contains compound interest tables and formulas. Appendix B is a chart of accounts used in the book along with abbreviations. Appendix C is an illustrative case that applies the techniques described in Modules 1 through 13 to an actual company, HarleyDavidson. Appendix C can be used as a guide, in conjunction with the moduleend project questions, for students required to prepare a company analysis.

Transaction Analysis and Statement Preparation

Instructors differ in their coverage of accounting mechanics. Some focus on the effects of transactions on financial statements using the balance sheet equation format. Others include coverage of journal entries and Taccounts. We accommodate both teaching styles. Specifically, Module 2 provides an expanded discussion of the effects of transactions using our innovative financial statement effects template. Emphasis is on the analysis of Apple’s summary transactions, which concludes with the preparation of its financial statements. Module 3, which is entirely optional, allows an instructor to drill down and focus on accounting mechanics: journal entries and Taccounts. It illustrates accounting for numerous transactions, including those involving accounting adjustments. It concludes with the preparation of financial statements. This detailed transaction analysis uses the same financial statement effects template, with journal entries and Taccounts highlighted in the margin. These two modules accommodate the spectrum of teaching styles—instructors can elect to use either or both modules to suit their preferences, and their students are not deprived of any information as a result of that selection.

Flexibility for Courses of Varying Lengths

Many instructors have approached us to ask about suggested class structures based on courses of varying length. To that end, we provide the following table of common course designs.


Managerial Emphasis

Tomorrow’s MBA graduates must be skilled in using financial statements to make business decisions. These skills often require application of ratio analyses, benchmarking, forecasting, valuation, and other aspects of financial statement analysis for decision making. Tomorrow’s MBA graduates must have the skills to go beyond basic financial statements and to interpret and apply nonfinancial statement disclosures, such as footnotes and supplementary reports. This book, therefore, emphasizes real company data, including detailed footnote and other management disclosures, and shows how to use this information to make managerial inferences and decisions. This approach makes financial accounting interesting and relevant for all MBA students.

As MBA instructors, we recognize that the core MBA financial accounting course is not directed toward accounting majors. Financial Accounting for MBAs embraces this reality. This book highlights financial reporting, analysis, interpretation, and decision making. We incorporate the following financial statement effects template to train MBA students in understanding the economic ramifications of transactions and their impact on financial statements. This analytical tool is a great resource for MBA students in learning accounting and applying it to their future courses and careers. Each transaction is identified in the “Transaction” column. Then, the dollar amounts (positive or negative) of the financial statement effects are recorded in the appropriate balance sheet or income statement columns. The template also reflects the statement of cash flow effects (via the cash column) and the statement of stockholders’ equity effects (via the contributed capital and earned capital columns). The earned capital account is immediately updated to reflect any income or loss arising from each transaction (denoted by the arrow line from net income to earned capital). This template is instructive as it reveals the financial impacts of transactions, and it provides insights into the effects of accounting choices.


Innovative Pedagogy

Financial Accounting for MBAs includes special features specifically designed for the MBA student.

Focus Companies for Each Module

Each module’s content is explained through the accounting and reporting activities of real companies. Each module incorporates a “focus company” for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage MBA students in real analysis and interpretation. Focus companies were selected based on the industries that MBA students typically enter upon graduation.


Real Company Data Throughout

Market research and reviewer feedback tell us that one of instructors’ greatest frustrations with other MBA books is their lack of real company data. We have gone to great lengths to incorporate real company data throughout each module to reinforce important concepts and engage MBA students. We engage nonaccounting MBA students specializing in finance, taxation, marketing, management, real estate, operations, and so forth, with companies and scenarios that are relevant to them. For representative examples, SEE PAGES 26, 416, 623, 73, 84, 910, 104, 116, and 1217.

Footnotes and Other Management Disclosures

Analyzed on their own, financial statements reveal only part of a corporation’s economic story. Information essential for a complete analysis of a company’s performance and financial position must be gleaned from the footnotes and other disclosures provided by the company. Consequently, we incorporate footnotes and other disclosures generously throughout the text and assignments. For representative examples, SEE PAGES 2-24, 428, 53, 69, 76, 815, 97, and 125.

Dual Approach to ROE and Financial Statement Analysis

We continue to stress profitability and return analysis as a “hook” for student interest. The analysis framework includes disaggregation of ROE and application of several other key metrics.

  • Module 4 opens with the traditional DuPont model as a simple, yet powerful, analysis framework.
  • Later in Module 4, we disaggregate ROE into operating and nonoperating components as a natural extension of the traditional DuPont model.
  • Later modules revisit the DuPont model, and text boxes throughout include deeper discussion of operating versus nonoperating activities.
  • Later modules also discuss factors that affect operating performance and consider actions that managers can take to improve that performance.

IndustryLevel Data

We repeatedly emphasize that financial analysis cannot be performed in a vacuum—appropriate benchmarks are critical to a complete understanding of a company’s financial performance and position. To this point, we provide graphics that capture industrylevel data including many of the ratios we discuss and compute in the modules. For representative examples, SEE PAGES 41, 54, 626, 717, 829, and 1014.

Decision Making Orientation

One primary goal of an MBA financial accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems and making informed business decisions. With that goal in mind, Managerial Decision boxes in each module encourage students to apply the material presented to solving actual business scenarios. For representative examples, SEE PAGES 426, 54, 811, 108, and 1115. Each module also includes Analysis Insight boxes that provide insight into data analysis techniques and models that financial analysts typically use. For representative examples, SEE PAGES 211, 613, 715, 917, 109, 1128, and 1224.

Reviews for Each Learning Objective

Financial accounting can be challenging—especially for MBA students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each module and to ensure student comprehension, we include reviews that require students to recall and apply the financial accounting techniques and concepts described in each section. Review questions usually include real financial statement data from a company in the same industry as the module’s focus company.

Experiential Learning

Students retain information longer if they can apply the lessons learned from the module content. To meet this need for experiential learning, we conclude each module with a handson analysis project. A series of questions guides students’ inquiry and helps students synthesize the material in the module and integrate material across modules.

Excellent, ClassTested Assignment Materials

Excellent assignment material is a musthave component of any successful book (and class). We went to great lengths to create the best assignments possible from contemporary financial statements. In keeping with the rest of the book, we used real company data extensively. We also ensured that assignments reflect our belief that MBA students should be trained in analyzing accounting information to make business decisions, as opposed to working on mechanical bookkeeping tasks. There are six categories of assignments: Questions, Mini Exercises, Exercises, Problems, IFRS Applications, and Management Applications.

Fundamentals of Financial Accounting Tutorial

This interactive tutorial is intended for use in programs that either require or would like to offer a pre-term tutorial that creates a baseline of accounting knowledge for students with little to no prior exposure to financial accounting. Initially developed as a pre-term tutorial for first-year MBA students, this product can be used as a warm-up for any introductory-level financial accounting course. It is designed as an asynchronous, interactive, self-paced experience for students.

Available Learning Modules (You Select)

  1.   Introducing Financial Accounting (approximate completion time 2 hours)
  2.   Constructing Financial Statements (approximate completion time 4 hours)
  3.   Adjusting Entries and Completing the Accounting Cycle (approximate completion time 4 hours)
  4.   Reporting and Analyzing Cash Flows (approximate completion time 3.5 hours)
  5.   Analyzing and Interpreting Financial Statements (approximate completion time 3.5 hours)
  6.   Excel and Time-Value of Money Basics (approximate completion time 2 hours)

This is a separate, saleable item. Contact your sales representative to receive more information or email customerservice@cambridgepub.com.

Companion Casebook

Cases in Financial Reporting, 8th edition by Michael Drake (Brigham Young University), Ellen Engel (University of Illinois—Chicago), D. Eric Hirst (University of Texas—Austin), and Mary Lea McAnally (Texas A&M University). This book comprises 27 cases and is a perfect companion book for faculty interested in exposing students to a wide range of real financial statements. The cases cover companies from Japan, Sweden, Austria, the Netherlands, the UK, India, as well as from the U.S. Many of the U.S. companies are major multinationals. Each case deals with a specific financial accounting topic within the context of one (or more) company’s financial statements. Each case contains financial statement information and a set of directed questions pertaining to one or two specific financial accounting issues.

This is a separate, saleable casebook (ISBN 978-1-61853-122-3). Contact your sales representative to receive a desk copy or email customerservice@cambridgepub.com.

New Edition Changes

Based on classroom use and reviewer feedback, a number of substantive changes have been made in the new edition to further enhance the MBA students’ experiences.

  • Digital delivery enhanced   To serve the expanding delivery modes of MBA education, we updated our inchapter Reviews and Guided Example videos for all chapters (each Learning Objective has a Review/Guided Example, as well as a corresponding eLecture).
  • Data visualization and analytics   Companies are increasingly using data visualization (charts, pictures, and graphs) to more effectively convey financial information. To support student learning, each module opens with a data dashboard and includes endofchapter assignments that present data graphically and require students to analyze and interpret the data visualizations. We provide students with online access (via MBC) to authorcreated PowerBI dashboards where they can interact with the data and learn how to create their own data visualizations.
  • Content reflects new standards   This edition covers new standards on Revenue Recognition, Leases, and Marketable Securities. It also includes in-depth discussion of the Tax Cuts and Jobs Act and how new tax law impacts financial analysis.
  • Revenue, Operating Expenses, and Receivables   We expanded the discussion of revenue recognition following the new standard and included an illustration and analysis of Microsoft’s revenue recognition. We also discuss sales returns and allowances and the effects of foreign currency exchange rates. Our operating expenses discussion introduces the effects of the Tax Cuts and Jobs Act, with a deeper discussion in Module 10.
  • Inventories   Our discussion of cash conversion cycle includes an illustration of management actions undertaken by Home Depot to streamline its supply chain to reduce days inventory outstanding.
  • Bond rating   A new section in Module 7 discusses Credit Analysis, including how bond ratings are deter- mined. We provide an example of S&P Global’s ratings for Verizon, following its purchase of Vodafone’s interest in Verizon Wireless. We also simplify our discussion of bond pricing.
  • Share-based compensation   Module 8 includes an expanded discussion of share-based compensation, and Tesla’s use of convertible debt. 
  • Investments   We include a deeper discussion of the determination of fair value, including an expanded discussion of Level 3 inputs to value securities with limited markets and the accounting for those securities. Module 6 includes a new, expanded discussion of the new goodwill impairment standard.
  • Derivatives   We markedly revised our discussion of derivatives to simplify the exposition while maintaining the analysis coverage.
  • Equity Carve-Outs   The discussion of equity carve-outs is simplified and we provide examples of the accounting for Sell-offs, IPOs, Spin-offs, and Split-offs. We also discuss the deconsolidation of a subsidiary.
  • Leasing   Module 10 reflects the new lease standard including the analysis of right-of-use assets and differences between operating and financial leases. We discuss retrospective and prospective adoption, using Microsoft and Delta Airlines.
  • Pension disclosures   We markedly revised our discussion of pension accounting with a detailed illustration of the pension footnote disclosures. We include a section on fair valuation of pension obligations and the accounting for plan settlements.
  • Taxes   We provide an in-depth, completely revised, discussion of income tax expense, including the effects of the Tax Cuts and Jobs Act and the analysis implications during the transition period.
  • Updated Assignments   We updated all data and financial statements throughout the book to reflect each company’s latest available financial statement filings and disclosures. Assignments include current financial statement excerpts and reflect new standards for Revenue Recognition, Leases, and Marketable Securities and the Tax Cuts and Jobs Act.



Introducing myBusinessCourse

myBusinessCourse is a complete, secure, web-based training and e-Learning solution. There is nothing to download or install; it is accessible through any modern web browser and most mobile devices.

Request a One-on-One Demo


eLecture Videos

eLecture Videos

  • Created by the authors of the textbook
  • Consistent with the textbook's explanations and approach
  • Cover learning objectives and concepts from each chapter
  • Ideal for remediation
  • Ideal for online and hybrid classrooms

Narrated demonstration videos

Guided Example Videos

  • Created by the authors of the textbook
  • Provide problem solving strategies as well as solutions
  • Offer clear, step-by-step demonstrations of how to solve select problems from the textbook

Auto-graded assignments

Auto-graded Assignments

  • Provides immediate feedback
  • Create assignments using problems from the textbook
  • Additional randomized versions of assignments provide extra practice
  • Ideal for remediation
  • Include select questions from test banks

Detailed Reporting Tools

Detailed Reporting Tools

  • Quickly review the performance of individual students
  • Quickly review the performance of entire class
  • Use reports on student performance to customize your lectures to fit student needs

Enhanced eBook

  • Save money
  • Includes myBusinessCourse
  • Integrates eLecture and demonstration videos
  • Bookmarking
  • Note taking
  • Highlighting

Third Party Integrations

Third Party Integrations

  • Single sign-on
  • Link to assignments in myBusinessCourse from your third party course
  • Automatically sync gradebooks each night

Flashcards

  • Study, learn and master key terms.
  • With linear-mode, get full control over the deck. Go back and forth between cards, shuffle and auto-play the deck.
  • With certainty-mode, test how well you know each term. If you are not certain you have learned the term, it will display again later in the deck.

Support and Training

Support and Training

  • Technical support for students and faculty available daily
  • Faculty training conducted daily
Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. v)
Module 1 Financial Accounting for MBAs (pg. 1-1)
Preview (pg. 1-1)
Reporting on Business Activities (pg. 1-3)
Business Activities (pg. 1-3)
Business Strategy (pg. 1-3)
Review 1-1 (pg. 1-4)
Financial Statements: Demand and Supply (pg. 1-4)
Demand for Information (pg. 1-4)
Supply of Information (pg. 1-7)
International Accounting Standards (pg. 1-8)
Review 1-2 (pg. 1-9)
Structure of Financial Statements (pg. 1-9)
Balance Sheet (pg. 1-10)
Income Statement (pg. 1-13)
Statement of Stockholders’ Equity (pg. 1-14)
Statement of Cash Flows (pg. 1-15)
Information Beyond Financial Statements (pg. 1-16)
Managerial Choices in Financial Accounting (pg. 1-17)
Review 1-3 (pg. 1-18)
Analysis of Financial Statements (pg. 1-18)
Return on Assets (pg. 1-18)
Components of Return on Assets (pg. 1-18)
Return on Equity (pg. 1-20)
Are Financial Statements Relevant? (pg. 1-20)
Review 1-4 (pg. 1-21)
Financial Statements and Business Analysis (pg. 1-22)
Analyzing the Competitive Environment (pg. 1-22)
SWOT Analysis of the Business Environment (pg. 1-23)
Analyzing Competitive Advantage (pg. 1-24)
Review 1-5 (pg. 1-25)
Book Road Map (pg. 1-25)
Global Accounting (pg. 1-26)
Appendix 1A: Financial Statement Data and Analytics (pg. 1-26)
SEC Filings (pg. 1-26)
Data Analytics (pg. 1-29)
Appendix 1B: Accounting Principles and Governance (pg. 1-30)
Financial Accounting Environment (pg. 1-30)
Audit Report (pg. 1-31)
Guidance Answers (pg. 1-34)
Questions (pg. 1-34)
Mini Exercises (pg. 1-35)
Exercises (pg. 1-38)
Problems (pg. 1-40)
IFRS Applications (pg. 1-46)
Management Applications (pg. 1-47)
Ongoing Project (pg. 1-48)
Solutions to Review Problems (pg. 1-48)
Review 1-1-Solution (pg. 1-48)
Review 1-2-Solution (pg. 1-49)
Review 1-3-Solution (pg. 1-49)
Review 1-4-Solution (pg. 1-50)
Review 1-5-Solution (pg. 1-50)
Module 2 Introducing Financial Statements (pg. 2-1)
Preview (pg. 2-1)
Balance Sheet (pg. 2-3)
Balance Sheet and the Flow of Costs (pg. 2-3)
Assets (pg. 2-4)
Liabilities and Equity (pg. 2-6)
Review 2-1 (pg. 2-13)
Income Statement (pg. 2-13)
Recognizing Revenues and Expenses (pg. 2-14)
Reporting of Transitory Items (pg. 2-15)
Analyzing the Income Statement (pg. 2-16)
Review 2-2 (pg. 2-17)
Statement of Stockholders’ Equity (pg. 2-17)
Review 2-3 (pg. 2-18)
Statement of Cash Flows (pg. 2-18)
Statement Format and Data Sources (pg. 2-18)
Review 2-4 (pg. 2-20)
Articulation of Financial Statements (pg. 2-20)
Retained Earnings Reconciliation (pg. 2-20)
Financial Statement Linkages (pg. 2-20)
Review 2-5 (pg. 2-22)
Additional Information Sources (pg. 2-22)
Form 10-K (pg. 2-22)
Form 20-F and Form 40-F (pg. 2-24)
Form 8-K (pg. 2-25)
Analyst Reports (pg. 2-25)
Credit Services (pg. 2-26)
Data Services (pg. 2-26)
Review 2-6 (pg. 2-26)
Global Accounting (pg. 2-26)
Balance Sheet (pg. 2-26)
Income Statement (pg. 2-26)
Guidance Answers (pg. 2-27)
Questions (pg. 2-27)
Mini Exercises (pg. 2-28)
Exercises (pg. 2-29)
Problems (pg. 2-34)
IFRS Applications (pg. 2-38)
Management Applications (pg. 2-38)
Ongoing Project (pg. 2-39)
Solutions to Review Problems (pg. 2-40)
Review 2-1-Solution (pg. 2-40)
Review 2-2-Solution (pg. 2-40)
Review 2-3-Solution (pg. 2-40)
Review 2-4-Solution (pg. 2-41)
Review 2-5-Solution (pg. 2-41)
Review 2-6-Solution (pg. 2-42)
Module 3 Transactions, Adjustments, and Financial Statements (pg. 3-1)
Preview (pg. 3-1)
Basics of Accounting (pg. 3-3)
Four-Step Accounting Cycle (pg. 3-3)
Financial Statement Effects Template (pg. 3-3)
Review 3-1 (pg. 3-5)
Accounting Cycle Step 1-Analyze Transactions and Prepare Entries (pg. 3-6)
Apple’s Transactions (pg. 3-6)
Applying the Financial Statement Effects Template (pg. 3-6)
Applying the Journal Entry and T-Account (pg. 3-6)
Bookmark 13 (pg. 3-8)
Accounting Cycle Step 2-Prepare Accounting Adjustments (pg. 3-9)
Four Types of Accounting Adjustments (pg. 3-9)
Prepaid Expenses (pg. 3-10)
Unearned Revenues (pg. 3-10)
Accrued Expenses (pg. 3-11)
Accrued Revenues (pg. 3-12)
Accounting Adjustments for Apple (pg. 3-12)
Review 3-3 (pg. 3-13)
Accounting Cycle Step 3-Prepare Financial Statements (pg. 3-13)
Income Statement (pg. 3-13)
Balance Sheet (pg. 3-14)
Statement of Stockholders’ Equity (pg. 3-15)
Review 3-4 (pg. 3-16)
Accounting Cycle Step 4-Close the Books (pg. 3-16)
Closing with the Template (pg. 3-16)
Closing with Journal Entries (pg. 3-16)
1. Close Revenue and Gain Accounts. (pg. 3-16)
2. Close Expense and Loss Accounts. (pg. 3-17)
3. Close Dividend Account. (pg. 3-17)
Accounting Cycle Summarized (pg. 3-17)
Review 3-5 (pg. 3-18)
Global Accounting (pg. 3-18)
Appendix 3A: FASB’s Financial Statement Presentation Project (pg. 3-19)
Guidance Answers (pg. 3-19)
Questions (pg. 3-20)
Mini Exercises (pg. 3-20)
Exercises (pg. 3-23)
Problems (pg. 3-27)
IFRS Applications (pg. 3-32)
Management Applications (pg. 3-33)
Solutions to Review Problems (pg. 3-35)
Review 3-1-Solution (pg. 3-35)
Review 3-2-Solution (pg. 3-36)
Review 3-3-Solution (pg. 3-36)
Review 3-4-Solution (pg. 3-37)
Review 3-5-Solution (pg. 3-37)
Module 4 Analyzing and Interpreting Financial Statements (pg. 4-1)
Preview (pg. 4-1)
Return on Equity (ROE) (pg. 4-3)
Review 4-1 (pg. 4-3)
ROE Disaggregation: DuPont Analysis (pg. 4-4)
Return on Assets (pg. 4-4)
Financial Leverage (pg. 4-5)
Review 4-2 (pg. 4-5)
Return on Assets and Its Disaggregation (pg. 4-6)
Analysis of Profitability and Productivity (pg. 4-7)
Analysis of Profitability (pg. 4-8)
Analysis of Productivity (pg. 4-9)
Analysis of Financial Leverage (pg. 4-12)
Review 4-3 (pg. 4-14)
Balance Sheet Analysis with an Operating Focus (pg. 4-14)
Operating and Nonoperating Returns (pg. 4-14)
Operating and Nonoperating Liabilities (pg. 4-15)
Return on Net Operating Assets (RNOA) (pg. 4-15)
Net Operating Assets (NOA) (pg. 4-15)
Net Nonoperating Obligations (NNO) (pg. 4-17)
Review 4-4 (pg. 4-18)
Income Statement Analysis with an Operating Focus (pg. 4-19)
Operating Line Items on the Income Statement (pg. 4-19)
Nonoperating Line Items on the Income Statement (pg. 4-19)
Net Nonoperating Expense (NNE) (pg. 4-22)
Review 4-5 (pg. 4-22)
Return on Net Operating Assets (RNOA) (pg. 4-23)
RNOA vs ROA (pg. 4-23)
Financial leverage (pg. 4-24)
Review 4-6 (pg. 4-25)
RNOA Disaggregation into Margin and Turnover (pg. 4-25)
Net Operating Profit Margin (pg. 4-25)
Net Operating Asset Turnover (pg. 4-26)
Trade-Off between Margin and Turnover (pg. 4-27)
Review 4-7 (pg. 4-29)
Global Accounting (pg. 4-29)
Appendix 4A: Operating versus Nonoperating Classification (pg. 4-30)
Appendix 4B: Nonoperating Return Component of ROE (pg. 4-31)
Nonoperating Return (pg. 4-31)
Nonoperating Return- With Substantial Net Nonoperating Assets: Amazon (pg. 4-33)
Nonoperating Return- With Noncontrolling Interest: AT&T (pg. 4-34)
Appendix 4C: Liquidity and Solvency Analysis (pg. 4-35)
Liquidity Analysis (pg. 4-36)
Current Ratio (pg. 4-36)
Quick Ratio (pg. 4-36)
Solvency Analysis (pg. 4-37)
Liabilities-to-Equity (pg. 4-37)
Times Interest Earned (pg. 4-38)
Vertical and Horizontal Analysis (pg. 4-38)
Limitations of Ratio Analysis (pg. 4-40)
Review 4-9 (pg. 4-41)
Guidance Answers (pg. 4-41)
Questions (pg. 4-42)
Mini Exercises (pg. 4-42)
Exercises (pg. 4-46)
Problems (pg. 4-50)
IFRS Applications (pg. 4-57)
Management Applications (pg. 4-57)
Ongoing Project (pg. 4-58)
Solutions to Review Problems (pg. 4-59)
Review 4-1-Solution (pg. 4-59)
Review 4-2-Solution (pg. 4-59)
Review 4-3-Solution (pg. 4-59)
Review 4-4-Solution (pg. 4-60)
Review 4-5-Solution (pg. 4-60)
Review 4-6-Solution (pg. 4-60)
Review 4-7-Solution (pg. 4-60)
Review 4-8-Solution (pg. 4-60)
Review 4-9-Solution (pg. 4-61)
Module 5 Revenues, Receivables, and Operating Expenses (pg. 5-1)
Preview (pg. 5-1)
Revenue (pg. 5-3)
Revenue Recognition Rules (pg. 5-4)
Complications of Revenue Recognition (pg. 5-5)
Performance Obligations Satisfied Over Time (pg. 5-7)
Review 5-1 (pg. 5-11)
Sales Allowances (pg. 5-11)
Accounting for Sales Allowances (pg. 5-11)
Reporting Sales Allowances (pg. 5-12)
Analysis of Sales Allowances (pg. 5-13)
Review 5-2 (pg. 5-13)
Unearned (Deferred) Revenue (pg. 5-14)
Review 5-3 (pg. 5-15)
Foreign Currency Effects on Revenue, Expenses, and Cash Flow (pg. 5-15)
Foreign Currency and Cash Flows (pg. 5-16)
Foreign Currency and Income (pg. 5-17)
Foreign Currency and Future Results (pg. 5-17)
Review 5-4 (pg. 5-18)
Accounts Receivable (pg. 5-19)
Aging Analysis of Receivables (pg. 5-19)
Accounting for Accounts Receivable (pg. 5-20)
Analysis of Accounts Receivable-Magnitude (pg. 5-21)
Analysis of Accounts Receivable-Quality (pg. 5-22)
Review 5-5 (pg. 5-24)
Expenses and Losses (pg. 5-25)
Deductions from Income (pg. 5-25)
Research and Development Expense (pg. 5-26)
Provision (Benefit) for Taxes on Income (pg. 5-28)
Discontinued Operations (pg. 5-28)
Review 5-6 (pg. 5-30)
Pro Forma Income Reporting (pg. 5-31)
Regulation G Reconciliation (pg. 5-31)
SEC Warnings about Pro Forma Numbers (pg. 5-32)
Disclosures and Market Assessments (pg. 5-32)
Review 5-7 (pg. 5-34)
Global Accounting (pg. 5-35)
Revenue Recognition (pg. 5-35)
Accounts Receivable (pg. 5-35)
Research and Development (pg. 5-35)
Guidance Answers (pg. 5-35)
Questions (pg. 5-35)
Mini Exercises (pg. 5-36)
Exercises (pg. 5-40)
Problems (pg. 5-47)
IFRS Applications (pg. 5-53)
Management Applications (pg. 5-54)
Ongoing Project (pg. 5-54)
Solutions to Review Problems (pg. 5-55)
Review 5-1-Solution (pg. 5-55)
Review 5-2-Solution (pg. 5-55)
Review 5-3-Solution (pg. 5-56)
Review 5-4-Solution (pg. 5-56)
Review 5-5-Solution (pg. 5-57)
Review 5-6-Solution (pg. 5-57)
Review 5-7-Solution (pg. 5-58)
Module 6 Inventories, Accounts Payable, and Long-Term Assets (pg. 6-1)
Preview (pg. 6-1)
Inventory-Costing Methods (pg. 6-3)
First-In, First-Out (FIFO) (pg. 6-4)
Last-In, First-Out (LIFO) (pg. 6-5)
Average Cost (AC) (pg. 6-5)
Financial Statement Effects of Inventory Costing (pg. 6-7)
Review 6-1 (pg. 6-8)
Inventory-Reporting (pg. 6-8)
Lower of Cost or Market (LCM) (pg. 6-8)
LIFO Reserve Adjustments to Financial Statements (pg. 6-9)
LIFO Liquidations (pg. 6-11)
Review 6-2 (pg. 6-11)
Inventory-Analysis Tools (pg. 6-12)
Gross Profit Analysis (pg. 6-12)
Days Inventory Outstanding and Inventory Turnover (pg. 6-13)
Days Payable Outstanding (pg. 6-15)
Cash Conversion Cycle (pg. 6-16)
Review 6-3 (pg. 6-17)
PPE Assets-Capitalization and Depreciation (pg. 6-17)
Plant and Equipment (pg. 6-18)
PPE Assets-Sales, Impairments, and Restructuring (pg. 6-20)
Asset Sales (pg. 6-20)
Asset Impairments (pg. 6-21)
Restructuring Costs (pg. 6-22)
Review 6-5 (pg. 6-24)
PPE Assets-Analysis Tools (pg. 6-25)
PPE Turnover (pg. 6-25)
PPE Useful Life (pg. 6-26)
PPE Percent Used Up (pg. 6-27)
Review 6-6 (pg. 6-27)
Global Accounting (pg. 6-27)
Inventory (pg. 6-27)
Property, plant, and equipment (pg. 6-28)
Research and Development (pg. 6-28)
Restructuring (pg. 6-28)
Guidance Answers (pg. 6-28)
Questions (pg. 6-29)
Mini Exercises (pg. 6-30)
Exercises (pg. 6-32)
Problems (pg. 6-38)
IFRS Applications (pg. 6-40)
Management Applications (pg. 6-42)
Ongoing Project (pg. 6-42)
Solutions to Review Problems (pg. 6-43)
Review 6-1-Solution (pg. 6-43)
Review 6-2-Solution (pg. 6-43)
Review 6-3-Solution (pg. 6-44)
Review 6-4-Solution (pg. 6-44)
Review 6-5-Solution (pg. 6-44)
Review 6-6-Solution (pg. 6-44)
Module 7 Current and Long-Term Liabilities (pg. 7-1)
Preview (pg. 7-1)
Accrued Liabilities (pg. 7-3)
Accrued Liabilities Defined (pg. 7-3)
Accruals for Contractual Liabilities-Wages Payable Example (pg. 7-4)
Accruals for Contractual Liabilities-Deferred Revenue Example (pg. 7-4)
Accruals for Contingent Liabilities (pg. 7-5)
Accruals for Contingent Liabilities-Warranties Example (pg. 7-5)
Review 7-1 (pg. 7-7)
Short-Term Debt (pg. 7-7)
Accounting for Short-Term Debt (pg. 7-7)
Current Maturities of Long-Term Debt (pg. 7-8)
Review 7-2 (pg. 7-9)
Long-Term Debt-Pricing (pg. 7-9)
Pricing of Bonds Issued at Par (pg. 7-10)
Pricing of Bonds Issued at a Discount (pg. 7-10)
Pricing of Bonds Issued at a Premium (pg. 7-11)
Effective Cost of Debt (pg. 7-11)
Review 7-3 (pg. 7-13)
Long-Term Debt-Reporting (pg. 7-13)
Balance Sheet Reporting (pg. 7-13)
Income Statement Reporting (pg. 7-14)
Financial Statement Effects of Bond Repurchase (pg. 7-14)
Review 7-4 (pg. 7-16)
Quality of Debt (pg. 7-16)
Credit Analysis (pg. 7-16)
What Are Credit Ratings? (pg. 7-18)
What Determines Credit Ratings? (pg. 7-18)
Verizon Credit Rating Example (pg. 7-21)
Why Credit Ratings Matter (pg. 7-23)
Review 7-5 (pg. 7-24)
Global Accounting (pg. 7-24)
Appendix 7A: Time Value of Money (pg. 7-25)
Present Value Concepts (pg. 7-25)
Present Value of a Single Amount (pg. 7-25)
Time Value of Money Tables (pg. 7-25)
Present Value of an Annuity (pg. 7-26)
Bond Valuation (pg. 7-27)
Time Value of Money Computations Using a Calculator (pg. 7-28)
Time Value of Money Computations Using Excel (pg. 7-28)
Future Value Concepts Future Value of a Single Amount (pg. 7-30)
Future Value of an Annuity (pg. 7-30)
Review 7-6 (pg. 7-30)
Appendix 7B: Amortization of Debt (pg. 7-31)
Amortization of Discount (pg. 7-31)
Amortization of Premium (pg. 7-32)
Guidance Answers (pg. 7-32)
Questions (pg. 7-32)
Mini Exercises (pg. 7-33)
Exercises (pg. 7-36)
Problems (pg. 7-41)
IFRS Applications (pg. 7-46)
Management Applications (pg. 7-48)
Solutions to Review Problems (pg. 7-48)
Review 7-1-Solution (pg. 7-48)
Review 7-2-Solution (pg. 7-49)
Review 7-3-Solution (pg. 7-49)
Review 7-4-Solution (pg. 7-49)
Review 7-5-Solution (pg. 7-51)
Review 7-6-Solution (pg. 7-51)
Module 8 Stock Transactions, Dividends, and EPS (pg. 8-1)
Preview (pg. 8-1)
Stockholders’ Equity and Classes of Stock (pg. 8-3)
Stockholders’ Equity Accounts (pg. 8-3)
Statement of Stockholders’ Equity (pg. 8-5)
Preferred Stock (pg. 8-6)
Common Stock (pg. 8-7)
Review 8-1 (pg. 8-8)
Stock Transactions (pg. 8-9)
Stock Issuance (pg. 8-9)
Stock Repurchase (Treasury Stock) (pg. 8-10)
Review 8-2 (pg. 8-12)
Stock-Based Compensation (pg. 8-13)
Characteristics of Stock-Based Compensation Plans (pg. 8-13)
Analysis of Stock-Based Compensation Plans (pg. 8-13)
Accounting for Stock-Based Compensation (pg. 8-14)
Footnote Disclosures for Stock-Based Compensation (pg. 8-15)
Review 8-3 (pg. 8-16)
Dividends and Stock Splits (pg. 8-16)
Cash Dividend Disclosures (pg. 8-17)
Dividend Payout and Yield (pg. 8-17)
Cash Dividends Financial Effects (pg. 8-17)
Stock Split (pg. 8-18)
Review 8-4 (pg. 8-19)
Accumulated Other Comprehensive Income (pg. 8-19)
AOCI Components (pg. 8-19)
AOCI Disclosures and Interpretation (pg. 8-20)
Review 8-5 (pg. 8-21)
Convertible Securities (pg. 8-22)
Convertible Securities Disclosures and Interpretation (pg. 8-22)
Convertible Securities Financial Effects (pg. 8-23)
Review 8-6 (pg. 8-23)
Earnings per Share (EPS) (pg. 8-23)
EPS Disclosures (pg. 8-24)
Review 8-7 (pg. 8-25)
Global Accounting (pg. 8-25)
Appendix 8A: Stock-Based Compensation: Reporting and Analyzing (pg. 8-26)
Employee Stock Purchase Plans (ESPP) (pg. 8-26)
Stock Awards (pg. 8-27)
Stock Options (pg. 8-27)
Stock Appreciation Rights (SAR) (pg. 8-28)
Summary of Share-Based Compensation (pg. 8-28)
Analysis Implications (pg. 8-28)
Guidance Answers (pg. 8-29)
Questions (pg. 8-30)
Mini Exercises (pg. 8-31)
Exercises (pg. 8-34)
Problems (pg. 8-39)
IFRS Applications (pg. 8-48)
Ongoing Project (pg. 8-50)
Solutions to Review Problems (pg. 8-51)
Review 8-1-Solution (pg. 8-51)
Review 8-2-Solution (pg. 8-51)
Review 8-3-Solution (pg. 8-52)
Review 8-4-Solution (pg. 8-52)
Review 8-5-Solution (pg. 8-52)
Review 8-6-Solution (pg. 8-53)
Review 8-7-Solution (pg. 8-53)
Module 9 Intercorporate Investments (pg. 9-1)
Preview (pg. 9-1)
Intercorporate Investments (pg. 9-3)
Passive Investments in Equity Securities (pg. 9-4)
Investments in Debt Securities (pg. 9-8)
Review 9-1 (pg. 9-11)
Equity Investments with Significant Influence (pg. 9-12)
Accounting for Investments with Significant Influence (pg. 9-12)
Equity Method Accounting and ROE Effects (pg. 9-14)
Review 9-2 (pg. 9-17)
Equity Investments with Control (pg. 9-17)
Accounting for Investments with Control (pg. 9-18)
Review 9-3 (pg. 9-27)
Global Accounting (pg. 9-28)
Passive Investments (pg. 9-28)
Equity Method Investment (pg. 9-28)
Consolidation (pg. 9-28)
Appendix 9A: Accounting for Derivatives (pg. 9-29)
Analysis of Derivatives (pg. 9-30)
Review 9-4 (pg. 9-31)
Appendix 9B: Equity Carve-Outs (pg. 9-32)
Analysis of Equity Carve-Outs (pg. 9-36)
Guidance Answers (pg. 9-36)
Questions (pg. 9-36)
Mini Exercises (pg. 9-37)
Exercises (pg. 9-41)
Problems (pg. 9-50)
IFRS Applications (pg. 9-52)
Ongoing Project (pg. 9-54)
Solutions to Review Problems (pg. 9-55)
Review 9-1-Solution (pg. 9-55)
Review 9-2-Solution (pg. 9-55)
Review 9-3-Solution (pg. 9-56)
Review 9-4-Solution (pg. 9-56)
Module 10 Leases, Pensions, and Income Taxes (pg. 10-1)
Preview (pg. 10-1)
Leases (pg. 10-3)
New Lease Reporting Standard (pg. 10-3)
Lessee Reporting Example-Microsoft Corporation (pg. 10-4)
Lease Accounting (pg. 10-5)
Summary of Lease Accounting and Reporting (pg. 10-9)
Analysis Issues Relating to Leases (pg. 10-10)
Review 10-1 (pg. 10-11)
Pensions (pg. 10-11)
Defined Benefit Pension Plans on the Balance Sheet (pg. 10-12)
Analysis Issue-Sufficiency of Plan Assets to Pay Pension Obligations (pg. 10-13)
Defined Benefit Pension Plans on the Income Statement (pg. 10-15)
Pension Expense Smoothing (pg. 10-16)
Fair Value Accounting for Pensions (pg. 10-19)
Footnote Disclosure-Key Assumptions (pg. 10-21)
Analysis Implications (pg. 10-22)
Other Post-Employment Benefits (OPEB) (pg. 10-23)
Review 10-2 (pg. 10-23)
Income Taxes (pg. 10-24)
Timing Differences Create Deferred Tax Assets and Liabilities (pg. 10-24)
Disclosures for Income Taxes (pg. 10-29)
Analysis of Income Tax Disclosures (pg. 10-30)
Expanded Explanation of Deferred Taxes (pg. 10-31)
Review 10-3 (pg. 10-33)
Global Accounting (pg. 10-35)
Leases (pg. 10-35)
Pensions (pg. 10-35)
Income Taxes (pg. 10-35)
Appendix 10A: Lease Accounting Example- Finance and Operating Leases (pg. 10-35)
Questions (pg. 10-36)
Mini Exercises (pg. 10-37)
Exercises (pg. 10-42)
Problems (pg. 10-50)
IFRS Applications (pg. 10-59)
Ongoing Project (pg. 10-61)
Solutions to Review Problems (pg. 10-61)
Review 10-1-Solution (pg. 10-61)
Review 10-2-Solution (pg. 10-62)
Review 10-3-Solution (pg. 10-62)
Module 11 Cash Flows (pg. 11-1)
Preview (pg. 11-2)
Framework for Statement of Cash Flows (pg. 11-3)
Relation Among Financial Statements (pg. 11-3)
Statement of Cash Flows Structure (pg. 11-4)
Operating Activities Preview (pg. 11-5)
Investing Activities Preview (pg. 11-8)
Financing Activities Preview (pg. 11-8)
Review 11-1 (pg. 11-8)
Cash Flow from Operating Activities (pg. 11-9)
Steps to Compute Net Cash Flow from Operating Activities (pg. 11-10)
Java House Case Illustration (pg. 11-11)
Review 11-2 (pg. 11-15)
Computing Cash Flows from Investing Activities (pg. 11-16)
Analyze Remaining Noncash Assets (pg. 11-16)
Java House Case Illustration (pg. 11-16)
Review 11-3 (pg. 11-18)
Cash Flows from Financing Activities (pg. 11-18)
Analyze Remaining Liabilities and Equity (pg. 11-18)
Java House Case Illustration (pg. 11-18)
Review 11-4A (pg. 11-19)
Computing Cash Flows from Balance Sheet Accounts (pg. 11-19)
Supplemental Disclosures for the Indirect Method (pg. 11-20)
Review 11-4B (pg. 11-21)
Analysis of Cash Flow Information (pg. 11-21)
Cash Flow Components (pg. 11-21)
Cash Flow Patterns (pg. 11-23)
Usefulness of the Statement of Cash Flows (pg. 11-25)
Review 11-5 (pg. 11-27)
Ratio Analyses of Cash Flows (pg. 11-27)
Free Cash Flow (pg. 11-28)
Review 11-6 (pg. 11-29)
Appendix 11A: Direct Method Reporting for Statement of Cash Flows (pg. 11-29)
Cash Flows from Operating Activities (pg. 11-29)
Converting Revenues and Expenses to Cash Flows (pg. 11-29)
Java House Case Illustration (pg. 11-29)
Convert Sales to Cash Received from Customers (pg. 11-30)
Convert Cost of Goods Sold to Cash Paid for Merchandise Purchased (pg. 11-30)
Convert Wages Expense to Cash Paid to Employees (pg. 11-31)
Convert Insurance Expense to Cash Paid for Insurance (pg. 11-31)
Eliminate Depreciation Expense and Other Noncash Operating Expenses (pg. 11-31)
Convert Income Tax Expense to Cash Paid for Income Taxes (pg. 11-31)
Omit Gains and Losses Related to Investing and Financing Activities (pg. 11-31)
Cash Flows from Investing and Financing (pg. 11-32)
Supplemental Disclosures (pg. 11-32)
Review 11-7 (pg. 11-32)
Guidance Answers (pg. 11-32)
Questions (pg. 11-33)
Mini Exercises (pg. 11-34)
Exercises (pg. 11-37)
Problems (pg. 11-43)
IFRS Applications (pg. 11-55)
Solutions to Review Problems (pg. 11-56)
Review 11-1-Solution (pg. 11-56)
Review 11-2-Solution (pg. 11-56)
Review 11-3-Solution (pg. 11-57)
Review 11-4A-Solution (pg. 11-57)
Review 11-4B-Solution (pg. 11-57)
Review 11-5-Solution (pg. 11-57)
Review 11-6-Solution (pg. 11-58)
Review 11-7-Solution (pg. 11-58)
Module 12 Financial Statement Forecasting (pg. 12-1)
Preview (pg. 12-1)
Forecasting Process (pg. 12-3)
Adjusted Financial Statements (pg. 12-3)
Forecasting Order of Financial Statements (pg. 12-3)
Morgan Stanley Forecasting Process (pg. 12-4)
Forecasting Mechanics (pg. 12-4)
Forecasting Consistency and Precision (pg. 12-4)
Company Guidance (pg. 12-5)
Review 12-1 (pg. 12-6)
Forecasting the Income Statement (pg. 12-8)
Overview (pg. 12-8)
Sales as the Income Statement Forecast Driver (pg. 12-9)
Cost of Goods Sold (COGS) (pg. 12-9)
SGA Expense (pg. 12-9)
Interest Expense (pg. 12-9)
Income Tax Expense (pg. 12-10)
Review 12-2 (pg. 12-11)
Forecasting the Balance Sheet (pg. 12-12)
Overview Here is a high-level overview of balance sheet forecasting-details follow. Working (pg. 12-12)
Working Capital Accounts (pg. 12-12)
PPE (Property, Plant and Equipment) Assets (pg. 12-12)
Intangible Assets (pg. 12-14)
Long-Term Debt (LTD) (pg. 12-14)
Retained Earnings (pg. 12-14)
Dividends (pg. 12-15)
Treasury Stock (pg. 12-15)
Cash Plug (the plug) (pg. 12-15)
Estimating the Normal Cash Level (pg. 12-15)
When Cash Plug Deviates from Norm (pg. 12-15)
Maintaining the Capital Structure (pg. 12-16)
Review 12-3 (pg. 12-16)
Building Forecasts from the Bottom Up (pg. 12-16)
Segment Data (pg. 12-16)
Review 12-4 (pg. 12-18)
Appendix 12A: Forecasting the Statement of Cash Flows (pg. 12-19)
Review 12-5 (pg. 12-20)
Appendix 12B: Multiyear Forecasting with Target Cash and New Debt Financing (pg. 12-20)
Forecasting Sensitivity Analysis (pg. 12-21)
Appendix 12C: Parsimonious Method for Forecasting NOPAT and NOA (pg. 12-22)
Multiyear Forecasting with Parsimonious Method (pg. 12-22)
Review 12-7 (pg. 12-23)
Appendix 12D: Morgan Stanley’s Forecast Report on Procter & Gamble (pg. 12-23)
Questions (pg. 12-31)
Mini Exercises (pg. 12-31)
Exercises (pg. 12-37)
Problems (pg. 12-45)
Ongoing Project (pg. 12-51)
Solutions to Review Problems (pg. 12-51)
Review 12-1-Solution (pg. 12-51)
Review 12-2-Solution (pg. 12-52)
Review 12-3-Solution (pg. 12-52)
Review 12-4-Solution (pg. 12-53)
Review 12-5-Solution (pg. 12-54)
Review 12-6-Solution (pg. 12-54)
Review 12-7-Solution (pg. 12-55)
Module 13 Using Financial Statements for Valuation (pg. 13-1)
Preview (pg. 13-2)
Equity Valuation Models (pg. 13-3)
Dividend Discount Model (pg. 13-3)
Discounted Cash Flow Model (pg. 13-3)
Residual Operating Income Model (pg. 13-3)
Valuation Model Inputs (pg. 13-4)
Review 13-1 (pg. 13-5)
Discounted Cash Flow (DCF) Model (pg. 13-5)
DCF Model Structure (pg. 13-5)
Steps in Applying the DCF Model (pg. 13-6)
Illustrating the DCF Model (pg. 13-6)
Review 13-2 (pg. 13-8)
Residual Operating Income (ROPI) Model (pg. 13-9)
ROPI Model Structure (pg. 13-9)
Steps in Applying the ROPI Model (pg. 13-9)
Illustrating the ROPI Model (pg. 13-10)
Review 13-3 (pg. 13-11)
Further Considerations Involving Valuation Models (pg. 13-11)
Managerial Insights from the ROPI Model (pg. 13-11)
Assessment of Valuation Models (pg. 13-12)
Review 13-4 (pg. 13-13)
Global Accounting (pg. 13-14)
Appendix 13A: Derivation of Free Cash Flow Formula (pg. 13-14)
Appendix 13B: Deutsche Bank Valuation of Procter & Gamble (pg. 13-14)
Qualitative and Quantitative Summary (pg. 13-14)
Concluding Observations of Analyst Report (pg. 13-25)
Guidance Answers (pg. 13-25)
Mini Exercises (pg. 13-26)
Exercises (pg. 13-27)
Problems (pg. 13-31)
Management Applications (pg. 13-36)
Ongoing Project (pg. 13-37)
Solutions to Review Problems (pg. 13-38)
Review 13-1-Solution (pg. 13-38)
Review 13-2-Solution (pg. 13-38)
Review 13-3-Solution (pg. 13-39)
Review 13-4-Solution (pg. 13-39)
Appendix A (pg. A-1)
Appendix B Chart of Accounts with Acronyms (pg. B-1)
Appendix C Comprehensive Case (pg. C-1)
Preview (pg. C-1)
Reviewing Financial Statements (pg. C-3)
Business Environment for Financial Reporting (pg. C-3)
Income Statement Reporting and Analysis (pg. C-3)
Balance Sheet Reporting and Analysis (pg. C-9)
Statement of Cash Flows Reporting and Analysis (pg. C-21)
Independent Audit Opinion (pg. C-22)
Assessing Profitability and Creditworthiness (pg. C-23)
ROE Disaggregation-DuPont Analysis (pg. C-23)
ROE Disaggregation-Operating Focus (pg. C-24)
Disaggregation of RNOA-Margin and Turnover (pg. C-25)
Credit Analysis (pg. C-26)
Summarizing Profitability and Creditworthiness (pg. C-26)
Forecasting Financial Statements (pg. C-27)
Valuing Equity Securities (pg. C-30)
Discounted Cash Flow Valuation (pg. C-31)
Residual Operating Income Valuation (pg. C-32)
Assessment of the Valuation Estimate (pg. C-32)
Summary Observations (pg. C-33)
Glossary (pg. G-1)
Index (pg. I-1)
Peter D. Easton

Peter D. Easton

Peter D. Easton is an expert in accounting and valuation and holds the Notre Dame Alumni Chair in Accountancy in the Mendoza College of Business.

Professor Easton’s expertise is widely recognized by the academic research community and by the legal community. Professor Easton frequently serves as a consultant on accounting and valuation issues in federal and state courts.

Professor Easton holds undergraduate degrees from the University of Adelaide and the University of South Australia. He holds a graduate degree from the University of New England and a PhD in Business Administration (majoring in accounting and finance) from the University of California, Berkeley.

Professor Easton’s research on corporate valuation has been published in the Journal of Accounting and Economics, Journal of Accounting Research, The Accounting Review, Contemporary Accounting Research, Review of Accounting Studies, and Journal of Business Finance and Accounting.

Professor Easton has served as an associate editor for 11 leading accounting journals and he is currently an associate editor for the Journal of Accounting Research, Journal of Business Finance and Accounting, and Journal of Accounting, Auditing, and Finance. He is an editor of the Review of Accounting Studies.

Professor Easton has held appointments at the University of Chicago, the University of California at Berkeley, Ohio State University, Macquarie University, the Australian Graduate School of Management, the University of Melbourne, Tilburg University, National University of Singapore, Seoul National University, and Nyenrode University. He is the recipient of numerous awards for excellence in teaching and in research. Professor Easton regularly teaches accounting analysis and security valuation to MBAs. In addition, Professor Easton has taught managerial accounting at the graduate level.


John J. Wild

John J. Wild

John J. Wild is a distinguished professor of accounting and business at the University of Wisconsin at Madison. He previously held appointments at Michigan State University and the University of Manchester in England.

He received his BBA, MS, and PhD from the University of Wisconsin. Professor Wild teaches courses in accounting and analysis at both the undergraduate and graduate levels. He has received the Mabel W. Chipman Excellence-in-Teaching Award, the departmental Excellence-in-Teaching Award, and the MBA Teaching Excellence Award (twice) from the EMBA graduation classes at the University of Wisconsin. He also received the Beta Alpha Psi and Salmonson Excellence-in-Teaching Award from Michigan State University. Professor Wild is a past KPMG Peat Marwick National Fellow and is a prior recipient of fellowships from the American Accounting Association and the Ernst & Young Foundation.

Professor Wild is an active member of the American Accounting Association and its sections. He has served on several committees of these organizations, including the Outstanding Accounting Educator Award, Wildman Award, National Program Advisory, Publications, and Research Committees. Professor Wild is author of several best-selling books. His research articles on financial accounting and analysis appear in The Accounting Review, Journal of Accounting Research, Journal of Accounting and Economics, Contemporary Accounting Research, Journal of Accounting, Auditing & Finance, Journal of Accounting and Public Policy, Journal of Business Finance and Accounting, Auditing: A Journal of Theory and Practice, and other accounting and business journals. He is past associate editor of Contemporary Accounting Research and has served on editorial boards of several respected journals, including The Accounting Review and the Journal of Accounting and Public Policy.


Robert F. Halsey

Robert F. Halsey

Robert F. Halsey is Professor of Accounting and Associate Dean of the Undergraduate School at Babson College. He received his MBA and PhD from the University of Wisconsin.

Prior to obtaining his PhD he worked as the chief financial officer (CFO) of a privately held retailing and manufacturing company and as the vice president and manager of the commercial lending division of a large bank.

Professor Halsey teaches courses in financial and managerial accounting at both the graduate and undergraduate levels, including a popular course in financial statement analysis for second year MBA students. He has also taught numerous executive education courses for large multinational companies through Babson’s school of Executive Education as well as for a number of stock brokerage firms in the Boston area. He is regarded as an innovative teacher and has been recognized for outstanding teaching at both the University of Wisconsin and Babson College.

Professor Halsey co-authors Advanced Accounting published by Cambridge Business Publishers. Professor Halsey’s research interests are in the area of financial reporting, including firm valuation, financial statement analysis, and disclosure issues. He has publications in Advances in Quantitative Analysis of Finance and Accounting, The Journal of the American Taxation Association, Issues in Accounting Education, The Portable MBA in Finance and Accounting, the CPA Journal, AICPA Professor/Practitioner Case Development Program, and in other accounting and analysis journals.

Professor Halsey is an active member of the American Accounting Association and other accounting, analysis, and business organizations. He is widely recognized as an expert in the areas of financial reporting, financial analysis, and business valuation.


Mary Lea McAnally

Mary Lea McAnally

Mary Lea McAnally is the Philip Ljundahl Professor of Accounting at the Mays Business School at Texas A&M. She obtained her Ph.D. from Stanford University and B. Comm. from the University of Alberta.

She worked as a Chartered Accountant (in Canada) and is a Certified Internal Auditor. Prior to arriving at Texas A&M in 2002, Professor McAnally held positions at University of Texas at Austin, Canadian National Railways, and Dunwoody and Company.

Her research interests include accounting and disclosure in regulated environments, executive compensation, and accounting for risk. She has published articles in the leading academic journals including Journal of Accounting and Economics, Journal of Accounting Research, The Accounting Review, Review of Accounting Studies, and Contemporary Accounting Research. Professor McAnally received the Mays Business School Research Achievement Award in 2005. She was Associate Editor at Accounting Horizons, served on the editorial board of Contemporary Accounting Research, and was Guest Editor for the MBA-teaching volume of Issues in Accounting Education. She is active in the American Accounting Association and its FARS section.

At Texas A&M, Professor McAnally teaches financial reporting, analysis, and valuation in the full-time, Professional, and Executive MBA programs. Through the Mays Center for Executive Development, she works with corporate clients. She has also taught at University of Alberta, University of Calgary, IMADEC (in Austria) and at the Indian School of Business at the Hyderabad and Mohali campuses. She has received numerous faculty-determined and student-initiated teaching awards at the MBA and executive levels. Those awards include the Beazley Award, the Trammell Foundation Award, the MBA Teaching Award (multiple times), the MBA Association Distinguished Faculty Award (three times), the Award for Outstanding and Memorable Faculty Member, and the Distinguished Achievement Award.


Instructors
You must have an instructor account and submit a request to access instructor materials for this book.
eBook
Go paperless today! Available online anytime, nothing to download or install.
6 months / $125.00
Course access code included