Skip to main content. Log In Sign Up. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation and fi- nancial instrument analysis, as well as much "Antedating of incremental analysis."
For a list of available titles, please visit our Web site at www. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Section or of the United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Rosewood Drive, Danvers, MA, fax This publication is designed to provide accurate and authoritative information in regard to the subject matter covered.
It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought. This title is also available in print as ISBN Some content that appears in the print version of this book may not be available in this electronic edition. For more information about Wiley products, visit web site at www.
For Shari, Virginia, and Armando. Certainly, Fridson and Alvarez show us how to do just that. Their approach to analyzing finan- cial statements should be commended. Frid- son and Alvarez show, in a very readable format, that diligent analysis still can make a difference.
"Antedating of incremental analysis" and Alvarez take you through finan- cial statement analysis with many salient examples that expose hidden agendas and help with assessing the true value of securities. Well written, insightful, and with numerable real life war Antedating of incremental analysis, this book is required reading for all high yield bond analysts at AIG.
They Antedating of incremental analysis in illustrating the use of financial statement analysis with many astonishing real life examples. This book starts where others stop. Clearly, a must read that brings the reader beyond the pure number crunching!
The situations they choose, and the way they lay out each example, make all the subtle relationships come to. They are real artists with spreadsheets that are easy for the reader to follow, and easy to adapt to new situations. For instant financial empowerment, buy this book and let Alvarez and ramp up your
Antedating of incremental analysis modeling skills.
Once again, the intention is to acquaint readers who have already ac- quired basic accounting skills with the Antedating of incremental analysis that arise in applying textbook-derived knowledge to the real world of extending credit and in- vesting in securities. Just as a swiftly changing environment necessitated ex- tensive
Antedating of incremental analysis and additions in the second edition, new concerns and challenges for users of financial statements have accompanied the dawn of the twenty-first century.
They must instead devise more insidious methods that gull investors into believing that the reported earnings gains are real. In response to this trend, we have expanded our survey of revenue recognition gimmicks designed to deceive the unwary. Another innovation that demands increased vigilance by financial ana- lysts is the conversion of
Antedating of incremental analysis market proceeds into revenues.
In terms of accounting theory, this kind of transformation is the equivalent of alchemy. Companies generate revenue by selling goods or services, not by selling their own shares to the public. During the Internet stock boom of the late s, however, clever opera- tors found a way around that constraint. Customers were superflu- ous to the revenue recognition process. In another Antedating of incremental analysis on the theme, franchisers sold stock, lent the proceeds to franchisees, then immediately had the Antedating of incremental analysis returned under the rubric of fees.
By going out for a short stroll and coming back, the proceeds of a financing mutated into revenues. We facilitate such integration of disciplines throughout Financial Statement Analysis, making excursions into economics and busi- ness management as well.
In addition, we encourage analysts to consider the institutional context in which financial reporting occurs. The issuers of financial statements also exert a strong influence over the creation of the financial principles, with powerful politi- cians sometimes carrying their water.
A final area in which the new edition offers a sharpened focus involves success stories in the critical examination of financial statements. Wherever we can find the necessary documentation, we show not how a corpo- rate debacle could have been foreseen through application of basis analyti- cal techniques, but how practicing analysts actually did detect the
Antedating of incremental analysis before it became widely recognized.
Readers will be encouraged by these examples, we hope, to undertake genuine, goal-oriented analysis, instead of simply going through the motions of calculating standard financial ratios. We will not allow a band of greedy short-sellers to destroy the value created by our outstanding employees. As for the plan of Financial Statement Analysis, readers should not feel compelled to tackle its chapters in the order we have assigned to them. To aid those who want to jump in somewhere in the middle of book, the third edition provides increased cross-referencing and an expanded Glos- sary.
Words that are defined in the Glossary are shown in bold faced type in the text. Although skipping around will be the most efficient approach for many analysts, a logical flow does underlie the sequencing of the material. The section explores the complex motiva- tions of issuing firms and their managers. We also study the distortions pro- duced by the organizational context in which the analyst operates. Under close scrutiny, terms such as value and income begin to look muddier than they appear when considered in the abstract.
Even cash flow, a concept commonly thought to convey redemptive clarification, is vulnerable to stratagems designed to manipulate the perceptions of in- vestors and creditors.
Our scrutiny of profits highlights the manifold ways in which earnings are exaggerated or even fabricated. By this point in the book, the reader should be amply imbued with the healthy skepticism nec- essary for a sound, structured approach to financial statement analysis.
For both credit and equity evaluation, forward-looking analysis is empha- sized over seductive but ultimately unsatisfying retrospection. Tips for max- imizing the accuracy of forecasts are included and real-life projections by professional securities analysts are dissected. We cast a critical eye on stan- dard financial ratios and valuation models, however widely accepted they may be. Financial markets continue to evolve, but certain phenomena appear again and again in new guises.
In this vein, companies never lose their re- sourcefulness in finding new ways to skew perceptions of their performance. By studying their methods closely, analysts can potentially anticipate the vari- ations on old themes that will materialize in years to come.
For individuals engaged in such activities, or who analyze financial data in connection with their personal investment decisions, there are two distinct approaches to the task. The first is to follow a prescribed routine, filling in boxes with standard financial ratios, calculated according to precise and inflexible definitions. It may take little more effort or mental exertion than this to satisfy the formal requirements of many positions in the field of financial analysis.
Operating in a purely mechanical manner, though, will not provide much of a profes- sional challenge. Some individuals, however, view such problems as only minor drawbacks. This book is aimed at the analyst who will adopt the second and more rewarding alternative, the relentless pursuit of accurate financial profiles of the entities being analyzed. Tenacity is essential because financial state- ments often conceal more than they reveal.
To the analyst who pursues this proactive approach, producing a standard spreadsheet on a "Antedating of incremental analysis" is a means rather than an end. Investors derive but little satisfaction from the knowledge that an untimely stock purchase recommendation was sup- ported by the longest row of figures available in the software package. Gen- uinely valuable analysis begins after all the usual questions have been answered. Indeed, a superior analyst adds value by raising questions that are not even on the checklist.
Some readers may not immediately concede the necessity of going be- yond an analytical structure that puts all companies on a uniform, objective scale. Comparability, after all, is a cornerstone of gen- erally accepted accounting principles GAAP. It might therefore seem to follow that financial statements prepared in accordance with Antedating of incremental analysis neces- sarily produce fair and useful indications of relative value.
The corporations that issue financial statements, moreover, would ap- pear to have a natural interest in facilitating convenient, cookie-cutter analysis. These companies spend heavily Antedating of incremental analysis disseminate information about their financial performance.
They employ investor-relations managers, they communicate with existing and potential shareholders via interim financial reports and press releases, and they dispatch senior management to peri- odic meetings with securities analysts.
Given that companies are so eager to make their financial results known to investors, they should also want it to be easy for analysts to monitor their progress. It follows that they can be expected to report their results in a transparent and straightforward Antedating of incremental analysis ion. Their conceptual error connotes no lack of intelligence, however. Even Howard Schilit see the MicroStrategy discussion, later in this chapteran acerbic critic of financial reporting as it is actually practiced, presents a high- minded view of the matter: The primary goal in financial reporting is the dissemination of financial statements that accurately measure the profitability and financial condi- tion of a company.
Rather, the issuers are for-profit com- panies, generally organized as corporations. At most, however, reporting financial results in a transparent and straightforward fashion is a means unto an end.
Simply stated, the lower the interest rate at which a corporation can borrow or the higher the price at which it can sell stock to new investors, the greater is the wealth of its shareholders.
If the highest ratings and multiples result from statements that measure profitabil- ity and financial condition inaccurately, the logic of fiduciary duty to Antedating of incremental analysis holders obliges management to publish that sort, rather than the type held up as a model in accounting textbooks. The best possible outcome is a cost of capital lower than the corporation deserves on its merits. This admittedly perverse argument can be summarized in the following maxim, presented from the perspective of issuers of financial statements: The purpose of financial reporting is to obtain cheap capital.
Attentive readers will raise two immediate objections. First, they will say, it is fraudulent to obtain capital at less than a fair rate by presenting an unrealistically bright financial picture. Second, some readers will argue that misleading the users of financial statements is not a sustainable strategy over the long run. Thereafter, they will adjust for the upward bias in the financial statements by projecting lower earnings than the historical re- sults would otherwise justify.
The outcome will be a stock valuation no higher than accurate reporting would have produced. Recognizing that the practice would be self-defeating, corporations will logically refrain from overstating their financial performance. By this reasoning, the users of Antedating of incremental analysis nancial statements can take the numbers at face value, because corporations that act in their self-interest will report their results honestly.
In lieu of easily understandable and accurate data, users of financial state- ments often find numbers that conform to GAAP yet convey a misleading impression of profits.
Worse yet, outright violations of the accounting rules come to light with distressing frequency. A few examples
Antedating of incremental analysis recent years indicate how severely an overly trusting user of financial statements can be misled. Doyle had no such bonus arrangement, leading some observers to wonder what motive he would have had to falsify the financials. Also in FebruaryMercury announced that it would file for bank- ruptcy.
In meta-analysis of the 2 cohorts and adjusting for standard. CHD risk factors . The incremental effect of ceramide ratios over standard.
CVD risk factors was . levels of these very–long-chain ceramides may antedate the clinical CVD events. INCREMENTAL ANALYSIS APPROACH Decisions involve a choice among alternative courses of action. Suppose that you were deciding whether to purchase. Financial Statement Analysis John Wiley & Sons Founded inJohn Wiley Each incremental unit 82 THE BASIC FINANCIAL STATEMENTS of sales will that antedate a major financial change such as a stock repurchase, write- "Antedating of incremental analysis," .