The Manager's Guide to Financial Statement Analysis

by Jablonsky, Stephen F.; Barsky, Noah P.

• ISBN13: 9780471402749
• ISBN10: 0471402745
• Edition: 2nd
• Format: Hardcover
• Copyright: 2001-02-05
• Publisher: Wiley

Summary

Praise for The Manager's Guide to Financial Statement Analysis "The Manager's Guide to Financial Statement Analysis opens the door for both financial and nonfinancial managers to develop a framework for understanding a company's true financial performance. The Manager's Guide goes the extra step by providing the reader with the skills necessary to communicate the impact of a firm's financial measures in a nontraditional, easy-to-understand manner. It is this combination of understanding and effective communication that allows the manager to then improve a firm through the use of financial information."-Christopher D. Flick, Investment Manager, The Vanguard Group "The Manager's Guide to Financial Statement Analysis has helped me in both my personal (investing) and professional (management) lives. The authors unravel the complexities of financial statements so that the information they contain can be easily digested and exploited. There is no more hiding a company's strategy behind a set of financial statements. I keep this book close at hand!"-Steven I. Glusman, Chief Engineer, Comanche Helicopter Program, Boeing Rotorcraft Program Management Center "A valuable framework for communicating firm results and aligning managers around common goals. The methodology links the information contained in a company's financial statements with its external market performance in a format that is easily understandable by the different functional managers of any company."-Scott Teeter, The LTC Group

Author Biography

STEPHEN F. JABLONSKY, PhD, CPA, is the senior member of The Management Communications Group and a faculty member at Penn State University. He helps managers see how they can develop a better understanding of their businesses through financial information. He has written numerous articles and monographs for various publications, and holds a BS, an MAS, and a PhD in accountancy from the University of Illinois. This is his fifth book.

Table of Contents

Preface	ix
Acknowledgments	xi
Introduction	xiii
Most Managers Are Quite Happy They Are Not Accountants	xv
Accounting Is the ``Language of Business''	xv
Is a Broader Economic Perspective Really Necessary?	xvi
Why Did We Write this Book?	xvii
Business Advocate Perspective of this Book	xx
Storytelling and Model Building	xxiii
Organization of The Manager's Guide	xxiv
PART ONE FINANCIAL STATEMENTS AND BUSINESS STRATEGY	1	(132)
Financial Statements and Business Strategy	3	(26)
Financial Statements	5	(3)
Beginning the Analysis	8	(7)
Strategic Profit Model: Quick Overview	15	(12)
Appendix 1A: Compound Annual Growth Rates	27	(2)
Strategic Profit Model: Margin Management	29	(13)
Net Sales	33	(1)
Cost of Sales	34	(1)
Gross Margin	34	(2)
Operating Expenses	36	(1)
Interest Expense	37	(1)
Other Expenses (Income)	38	(1)
Income before Income Taxes	38	(1)
Provision for Income Taxes	38	(1)
Net Income	39	(1)
Profit Margin	40	(2)
Strategic Profit Model: Asset Management	42	(17)
Current Assets	45	(7)
Productive Assets	52	(2)
Other Assets	54	(1)
Total Assets	55	(1)
Asset Turnover	56	(3)
Strategic Profit Model: Return on Assets	59	(10)
Return on Assets	63	(3)
Explaining Past Performance	66	(1)
Speculating About the Future	66	(3)
Strategic Profit Model: Financial Management	69	(18)
Financial Leverage	71	(3)
Total Liabilities: A Closer Look	74	(6)
Shareholders' Equity	80	(3)
Financial Management Perspective	83	(4)
Strategic Profit Model: Comprehensive Management	87	(9)
Integrity of Financial Statements	88	(1)
Shareholder Accountability	88	(1)
Report of Independent Auditors	89	(1)
From Formal to Substantive Accountability	90	(1)
Strategic Profit Model Revisited	90	(2)
Return on Assets	92	(1)
Return on Equity	93	(1)
Drawing Your Own Conclusions	94	(2)
Strategic Financing Model: Long-Term Investment and Financing	96	(21)
Restructuring the Balance Sheet	97	(10)
Strategic Financing Model	107	(10)
Strategic Financing Model: Financing the Business	117	(16)
Management's Contribution to Financing the Business	120	(3)
Long-Term Investment	123	(3)
External Financing	126	(4)
The SFM and Understanding the Business	130	(3)
PART TWO MARKET VALUATION AND BUSINESS STRATEGY	133	(56)
Market Valuation: Market Performance Measures	135	(12)
Market Valuation and the Strategic Profit Model	137	(4)
Price/Earnings and Market/Book Ratios	141	(3)
Wal-Mart and the S&P 500	144	(3)
Market Valuation: Long-Term Debt	147	(17)
Debt and Equity Securities	148	(5)
Market Valuation of Long-Term Debt	153	(1)
Time Value of Money	154	(3)
Long-Term Debt: Mind Your Ps and Qs	157	(3)
Fast Forward Six Years	160	(4)
Market Valuation: Common Stock	164	(16)
Cost of Equity Capital	165	(2)
Overall Economy	167	(1)
Wal-Mart's Cost of Equity Capital	168	(4)
Stream of Equity Cash Flows	172	(4)
Present and Future Values	176	(2)
Reality Check	178	(2)
Market Valuation: Strategic Profit Model Revisited	180	(9)
Management Performance and Market Performance	181	(1)
Concept of Equity Spread	182	(3)
Expanded Summary Version of the Strategic Profit Model	185	(4)
Appendices: Case Studies	189	(68)
Introduction to Case Studies	191	(4)
Appendix A: Dell Computer Corporation	195	(20)
Appendix B: Pfizer, Inc	215	(19)
Appendix C: Cisco Systems	234	(23)
Index	257