Analysis of Financial Statements, 2nd Edition

by Pamela P. Peterson; Frank J. Fabozzi (School of Management, Yale Univ.)

• ISBN13: 9780471719649
• ISBN10: 0471719641
• Edition: 2nd
• Format: Hardcover
• Copyright: 2006-02-01
• Publisher: Wiley

Summary

"Recent financial scandals and events have taught us to take a more critical look at the financial disclosures provided by companies. Pamela P. Peterson and Frank J. Fabozzi once again team up to provide a practical guide to understanding and interpreting financial statements. In Analysis of Financial Statements, Second edition, the authors help analysts and investors use these disclosures to assess a company's financial health and risks." "Throughout Analysis of Financial Statements, Second Edition, the authors demonstrate the nuts and bolts of financial analysis by applying the techniques to actual companies."--BOOK JACKET.

Author Biography

<b>Pamela P. Peterson</b> (Tallahassee, FL), Ph.D. CFA is a professor of Finance at Florida State University where she teaches undergraduate courses in corporate finance and doctoral courses in empirical research methods. Professor Peterson has published articles in numerous journals including the <i>Journal of Finance</i>, the <i>Journal of Financial Economics</i>, the <i>Journal of Banking and Finance</i>, <i>Financial Management</i>, and the <i>Financial Analysts Journal</i>. She and David R. Peterson co-wrote the AIMR monograph <i>Company Performance and Measures of Value Added.</i> Professor Peterson has written collaboratively with Frank J. Fabozzi on <i>Analysis of Financial Statements</i> published by Frank J. Fabozzi Associates, <i>Capital Budgeting,</i> and&#160;<i>Financial Management and Analysis,</i> both&#160;published by Wiley. <p> <b>Frank J. Fabozzi</b> (New Hope, PA) is the Frederick Frank Adjunct Professor of Finance in the School of Management at Yale University. Frank is a Fellow of the International Center for Finance at Yale University, the editor of the <i>Journal of Portfolio Management</i>, a member of Princeton University&#8217;s Advisory Council for the Department of Operations Research and Financial Engineering, and a trustee of the BlackRock complex of closed-end funds and Guardian Life sponsored open-end mutual funds.

Table of Contents

Preface	xi
About the Authors	xiii
PART ONE The Basics	1	(92)
CHAPTER 1 Introduction	3	(30)
What Is Financial Analysis?	4	(1)
What Happens if We Are Not Looking Closely at Financial Information?	5	(1)
Where Do We Find the Financial Information?	6	(1)
Who Gets What Type of Information and When?	7	(19)
What Does Sarbanes-Oxley Mean to Companies and Investors?	26	(4)
Summary	30	(3)
CHAPTER 2 Financial Statements	33	(26)
Accounting Principles: What Are They?	33	(3)
What Do the Basic Financial Statements Tell Us?	36	(16)
Accounting Flexibility	52	(2)
How Does Accounting in the United States Differ from Accounting Outside of the United States?	54	(1)
Summary	54	(5)
CHAPTER 3 The Quality of Financial Information	59	(34)
It Is All in the Timing	61	(12)
Too Many Choices?	73	(10)
So What Is Their Business?	83	(1)
Restatements and Financial Analysis	84	(2)
Tell-Tale Signs	86	(4)
Summary	90	(3)
PART TWO Analysis of Financial Statements	93	(102)
CHAPTER 4 Financial Analysis	95	(46)
What Are Ratios and How Do We Use Them?	96	(3)
What Are the Different Types of Ratios?	99	(13)
Analysis of Return-on-Investment Ratios	112	(11)
How Can We Use Common-Size Analysis to Analyze Financial Statements?	123	(2)
Integrated Ratio Analysis	125	(8)
What Are the Pitfalls and Pratfalls of Financial Ratio Analysis?	133	(4)
Summary	137	(4)
CHAPTER 5 Equity Analysis	141	(32)
Earnings	141	(10)
Price-Earnings Ratio	151	(3)
Dividends	154	(12)
Other Fundamentals	166	(1)
Book-to-Market Ratio	167	(3)
Summary	170	(3)
CHAPTER 6 Cash Flow Analysis	173	(22)
Difficulties with Measuring Cash Flow	173	(2)
Cash Flows and the Statement of Cash Flows	175	(6)
Free Cash Flow	181	(4)
Net Free Cash Flow	185	(1)
The Usefulness of Cash Flows in Financial Analysis	186	(7)
Summary	193	(2)
PART THREE Applying Financial Analysis	195	(88)
CHAPTER 7 Measuring Company Performance	197	(34)
Porter's Five Forces	199	(2)
Measures of Value Added	201	(2)
Traditional Performance Measures	203	(1)
A Closer Look at Value Added Measures	204	(18)
Reconciling Economic Value Added with Market Value Added	222	(2)
But Are Value-Added Measures Better?	224	(4)
Summary	228	(3)
CHAPTER 8 Credit Analysis	231	(22)
Types of Credit Risk	231	(7)
Factors to Consider in Corporate Credit Analysis	238	(12)
Summary	250	(3)
CHAPTER 9 Analysis of Risk Using Fundamentals	253	(14)
Measuring Risk	253	(2)
Asset Pricing Model	255	(3)
Factor Models	258	(1)
Fundamental Factor Models	259	(5)
Applications of Fundamental Factor Models	264	(1)
Summary	265	(2)
CHAPTER 10 The Lessons We Learn	267	(16)
The Lessons	270	(10)
The Future of Financial Analysis in the Post-SOX Era	280	(1)
Conclusion	281	(2)
INDEX	283