PPT Ch 2 Fin Statement Analysis

PPT Ch 2 Fin Statement Analysis - Financial Statement...

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Financial Statement Analysis 0 Financial Statement Analysis
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Financial Statement Analysis 0 Key Concepts and Skills Know why the disclosure of financial information through financial statements is critical to investors Know the important features of major financial statements Use the financial statements to analyze a firm Know how to compute financial ratios with a given financial statement, and to interpret the ratios
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Financial Statement Analysis 0 Disclosure of Financial Information Who can use the accounting information? Internal: management External: government, shareholders, financial analysts, banks, etc. Requirements of disclosing financial information Public companies must file financial results with the Securities and Exchange Commission (SEC) on a quarterly basis (10-Q), and an annual basis (10-K) The annual report with financial statements must be sent to their shareholders every year.
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Financial Statement Analysis 0 Disclosure of Financial Information Preparation of financial statements GAAP: set by the Financial Accounting Standards Board (FASB) to provide a common set of rules and a standard format for public companies’ reports. Auditor: required to ensure financial statements are prepared according to GAAP, and provide evidence that the information is reliable .
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Global Accounting Standard American companies must use rules established by the FASB, a group chosen by the S.E.C., and foreign companies that do not use international standards must reconcile their statements with the American rules before their securities can trade in American markets. 0 Financial Statement Analysis
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Global Accounting Standard Openness to IAS and foreign GAAP Reduce the costs to foreign firms seeking to list their stocks on the U.S. exchanges and raise capital, thus enhance the competitiveness of U.S. capital markets Concern: IAS or foreign GAAP disclosures might be of low quality, which could potentially weaken the stability of U.S. financial markets. 0 Financial Statement Analysis
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Financial Statement Analysis 0 Disclosure of Financial Information Major financial statements required by the SEC Balance sheet Income statement Statement of cash flows Statement of stockholders’ equity Statement of comprehensive income
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Financial Statement Analysis 0 Sources of Information Company website Wall Street Journal Internet NYSE (www.nyse.com) NASDAQ (www.nasdaq.com) SEC EDGAR 10K & 10Q reports
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Financial Statement Analysis 0 The Balance Sheet A snapshot of the firm’s assets and liabilities at a given point in time Assets are listed in order of decreasing liquidity Liabilities are also listed in the order of time Balance Sheet Identity Assets = Liabilities + Stockholders’ Equity Market value vs. book value The balance sheet provides the book value
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The Balance Sheet Current Assets Cash and other marketable securities short-term, low-risk investments
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