Financial Statements Analyisis

Financial Statement Analysis Fall 2014 STUDY GUIDE

2. Review of Financial Statements This topic will take 2 weeks. The slides are organized as follows: 2. A Income Statement, Revenue Recognition, EPS & Non GAAP Earnings– Chapter 4 (2 classes) 2. B Balance Sheet and Cash Flow Statement – Chapters 5 & 6 (2 classes) Robinson text: In all three recommended chapters the Analysis and Ratio material (at the end of each chapter) will be covered when we do Chapter 7 Financial Statement Analysis - Applications Topic Objectives: 1. Understand the relationships between the financial statements (F/S)  You are not responsible for journal entries but you must understand what accounts would be affected by a transaction, how the accounts are affected, and how the financial statements stay in balance. 2. Understand the classification of items on the I/S and B/S  Distinguish between continuing & discontinued operations on both the B/S & I/S  Understand non-operating items on the I/S such as extraordinary items, restructuring charges, etc and the tax effects of each  Be able to interpret the above two points usefulness for predicting future cash flows and operations  Understand what items are included in comprehensive income and how it is reported on the I/S and B/S  Identify different assets and liabilities on the balance sheet  Understand the various measurement choices used on the B/S  Identify different formats of the B/S  Differentiate between a change in accounting estimate, a change in accounting policy, and an error and how each is reported on the F/S 3. Revenue Recognition Process  Identify the criteria for revenue recognition  Identify different acceptable points for revenue recognition.  Understand the relationship between the recognition of revenue and the related balance sheet accounts: A/R, inventory, unearned revenue  Calculate revenue under Percentage-of-Completion and alternative methods for simple examples of long-term contracts 4. EPS  Differentiate...