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首页 How to Read a Financial Report: Wringing Vital S…

How to Read a Financial Report: Wringing Vital Signs Out of the Numbers by John A. Tracy .pdf

How to Read a Financial Report:…

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2013-12-22 0人阅读 举报 0 0 0 暂无简介

简介:本文档为《How to Read a Financial Report: Wringing Vital Signs Out of the Numbers by John A. Tracy pdf》,可适用于社会民生领域

PageiiiHowtoReadaFinancialReportWringingVitalSignsOutoftheNumbersFifthEditionJohnATracy,PhD,CPAPageivThisbookisprintedonacidfreepaperCopyright©byJohnATracyAllrightsreservedPublishedbyJohnWileySons,IncPublishedsimultaneouslyinCanadaNopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptaspermittedunderSectionoroftheUnitedStatesCopyrightAct,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthroughpaymentoftheappropriatepercopyfeetotheCopyrightClearanceCenter,RosewoodDrive,Danvers,MA,(),fax()RequeststothePublisherforpermissionshouldbeaddressedtothePermissionsDepartment,JohnWileySons,Inc,ThirdAvenue,NewYork,NY,(),fax(),EMail:PERMREQWILEYCOMThispublicationisdesignedtoprovideaccurateandauthoritativeinformationinregardtothesubjectmattercoveredItissoldwiththeunderstandingthatthepublisherisnotengagedinrenderingprofessionalservicesIfprofessionaladviceorotherexpertassistanceisrequired,theservicesofacompetentprofessionalpersonshouldbesoughtLibraryofCongressCataloginginPublicationData:Tracy,JohnAHowtoreadafinancialreport:wringingvitalsignsoutofthenumbersJohnATracythedpcmIncludesindexISBN(cloth:alkpaper)ISBN(paper:alkpaper)FinancialstatementsITitleHFBT'dcPrintedintheUnitedStatesofAmericaPagevPrefacetotheFifthEditionWhenIstartedthisbookwehadnograndchildrentodaywehaveeightThen(–)theDowJonesIndustrialAveragehoveredaroundTodaytheDowisover,amultipleoftimesinyearsDuringthisperiod,millionsofpersonsenteredthestockmarketTodayalargepartofretirementsavingsisinvestedinstocksStockvaluesdependoninformationreportedinfinancialstatements,soknowinghowtoreadafinancialreportismoreimportantthaneverThiseditioncatchesupwithrecentdevelopmentsinfinancialstatementaccountingandfinancialreportingAllexhibitshavebeenrefreshedtomakethemeasiertofollowandmorerelevantTheexhibitsinthiseditionaretypesetfromprintoutsfromMicrosoftExcel®worksheetsIhavepreparedTorequestacopypleasecontactmeatmyemailaddress:tracyjcoloradoeduInthiseditionIhaveaddedabriefintroductiontomanagementaccounting(Chapter)thatfocusesonprofitreportingtobusinessmanagersAninternalprofitreportincludessensitiveandconfidentialinformationthatisnotdivulgedinacompany'sexternalfinancialreporttoitsoutsideinvestorsandlendersBusinessentrepreneursinparticularshouldfindthischapteraveryusefuladditiontothebookOtherwise,thecontentandbasicapproachofthebookremainthesameAstheysay:"Ifitain'tbroke,don'tfixit"TheformatandfocusofthebookhaveprovedPagevPrefacetotheFifthEditionWhenIstartedthisbookwehadnograndchildrentodaywehaveeightThen(–)theDowJonesIndustrialAveragehoveredaroundTodaytheDowisover,amultipleoftimesinyearsDuringthisperiod,millionsofpersonsenteredthestockmarketTodayalargepartofretirementsavingsisinvestedinstocksStockvaluesdependoninformationreportedinfinancialstatements,soknowinghowtoreadafinancialreportismoreimportantthaneverThiseditioncatchesupwithrecentdevelopmentsinfinancialstatementaccountingandfinancialreportingAllexhibitshavebeenrefreshedtomakethemeasiertofollowandmorerelevantTheexhibitsinthiseditionaretypesetfromprintoutsfromMicrosoftExcel®worksheetsIhavepreparedTorequestacopypleasecontactmeatmyemailaddress:tracyjcoloradoeduInthiseditionIhaveaddedabriefintroductiontomanagementaccounting(Chapter)thatfocusesonprofitreportingtobusinessmanagersAninternalprofitreportincludessensitiveandconfidentialinformationthatisnotdivulgedinacompany'sexternalfinancialreporttoitsoutsideinvestorsandlendersBusinessentrepreneursinparticularshouldfindthischapteraveryusefuladditiontothebookOtherwise,thecontentandbasicapproachofthebookremainthesameAstheysay:"Ifitain'tbroke,don'tfixit"TheformatandfocusofthebookhaveprovedPageviverysuccessfulCashflowisunderscoredthroughoutthebookthisisthehallmarkofthebook,andwhatdistinguishesitfromotherbooksonanalyzingfinancialstatementsNotmanybookslikethismakeittothefiftheditionIttakesthejointeffortofboththeauthorandthepublisherIthankthemanypersonsatJohnWileySonswhohaveworkedwithmeonthebookovertwodecadesThecommentsandsuggestionsonmyfirstdraftforthebookbyJoeRoss,thennationaltrainingdirectorofMerrillLynch,wereextraordinarilyhelpfulAgainIexpressmydeepestgratitudetotheoriginaleditorofthebook,GordonLaingforhisguidance,encouragement,andfriendshipGordongaveshapetothebookHissuperbeditingwasablessingthatfewauthorsenjoyGordontakesmuchprideinthesuccessofthebookaswellheshould!Gordon,youoldreprobate,Icouldn'thavedoneitwithoutyouJOHNATRACYBOULDER,COLORADOJANUARYPageviiContentsStartingwithCashFlowsIntroducingtheBalanceSheetandIncomeStatementProfitIsn'tEverythingSalesRevenueandAccountsReceivableCostofGoodsSoldExpenseandInventoryInventoryandAccountsPayableOperatingExpensesandAccountsPayableOperatingExpensesandPrepaidExpensesFixedAssets,DepreciationExpense,andAccumulatedDepreciationAccruingUnpaidOperatingExpensesandInterestExpensePageviiiIncomeTaxExpenseandIncomeTaxPayableNetIncomeandRetainedEarningsEarningsPerShare(EPS)CashFlowfromProfitCashFlowsfromInvestingandFinancingActivitiesGrowth,Decline,andCashFlowFootnotesTheFinePrintinFinancialReportsTheCostofCredibilityAuditsbyCPAsAccountingMethodsandQualityofEarningsMakingandChangingtheRulesCostofGoodsSoldConundrumDepreciationDilemmasRatiosforCreditorsandInvestorsALookInsideManagementAccountingAFewPartingCommentsIndexPageStartingwithCashFlowsPageImportanceofCashFlows:CashFlowsSummaryforaBusinessBusinessmanagers,lenders,andinvestors,quiterightly,focusoncashflowsCashinflowsandolowsaretheheartbeatofeverybusinessSo,we'llstartwithcashflowsForourexamplewe'lluseamidsizecompanythathasbeenoperatingmanyyearsThisestablishedbusinessmakesaprofitregularlyand,equallyimportant,itkeepsingoodfinancialconditionIthasagoodcreditratingbanksarewillingtolendmoneytothecompanyonverycompetitivetermsIfthebusinessneededmoremoneyforexpansion,newinvestorswouldbewillingtosupplyfreshcapitaltothebusinessNoneofthiscomeseasy!Ittakesgoodmanagementtomakeprofit,toraisecapital,andtostayoutoffinancialtroubleExhibitAonthenextpagepresentsasummaryofthecompany'scashinflowsandolowsforitsmostrecentyearTwodifferentgroupsofcashflowsareshownFirstarethecashflowsofmakingprofitcashinflowsfromsalesandcasholowsforexpensesSecondaretheothercashinflowsandolowsofthebusinessraisingcapital,investingcapital,anddistributingprofittoitsownersIassumeyou'refairlyfamiliarwiththecashinflowsandolowslistedinExhibitAso,I'llbebriefindescribingeachcashflowatthisearlypointinthebook:•Inthefirstgroupofcashflows,thebusinessreceivedmoneyfromsellingproductstoitscustomersItshouldbenosurprisethatthisisthelargestsourceofcashinflow,amountingto$,,duringtheyearCashinflowfromsalesrevenueisneededforpayingexpensesThecompanypaid$,,formanufacturingproductssoldtoitscustomersand,ithadsizablecasholowsforoperatingexpenses,interestonitsdebt(borrowedmoney),andincometaxThenetresultoftheseprofitmakingcashflowswasapositive$,fortheyearwhichisanextremelyimportantnumberthatmanagers,lenders,andinvestorswatchclosely•Inthesecondgroupofcashflows,noticefirstofallthatthecompanyraisedadditionalcapitalduringtheyearNotespayableincreased$,fromborrowingduringtheyearand,$,wasinvestedbystockholders(theownersofacorporation)Ontheothersideoftheledgerthebusinessspent$,forbuildingimprovements,machines,equipment,vehicles,andcomputersAnd,thebusinessdistributed$,toitsstockholdersfromprofititearnedduringtheyearThenetresultofthesecondgroupofcashflowswasanegative$,fortheyear,whichismorethanthecashflowfromitsprofitmakingoperationsfortheyearPageEXHIBITASUMMARYOFCASHFLOWSDURINGYEARPageWhatDoesCashFlowsSummaryNOTTellyouInExhibitAweseethatcash,theallimportantlubricantofbusinessactivity,decreased$,duringtheyearInotherwords,allcasholowsexceededallcashinflowsbythisamountfortheyearWithoutadoubtthiscashdecreaseandthereasonsforthedecreaseareveryimportantinformationThecashflowssummarytellsaveryimportantpartofthestoryofabusinessBut,cashflowsdonottellthewholestoryBusinessmanagers,investorsinbusiness,businesslenders,andmanyothersneedtoknowtwootheressentialthingsaboutabusinessthatarenotreportedinitscashflowssummaryThetwomostimportanttypesofinformationthatasummaryofcashflowsdoesnottellyouare:Theprofitearned(orlosssuffered)bythebusinessfortheperiodThefinancialconditionofthebusinessattheendoftheperiodNow,justaminuteDidn'twejustseeinExhibitAthatthenetcashincreasefromsalesrevenuelessexpenseswas$,fortheyearYoumaywellask:''Doesn'tthiscashincreaseequaltheamountofprofitearnedfortheyear''No,itdoesn'tThenetcashflowfromprofitmakingoperationsduringtheyeardoesnotequalprofitfortheyearInfact,it'snotunusualforthesetwonumberstobeverydifferentProfitisanaccountingdeterminednumberthatrequiresmuchmorethansimplykeepingtrackofcashflowsThedifferencesbetweenusingacheckbooktomeasureprofitandusingaccountingmethodstomeasureprofitareexplainedinthefollowingsectionHardlyeverarecashflowsduringaperiodthecorrectamountsformeasuringacompany'ssalesrevenueandexpensesforthatperiodSummingup,profitcannotbedeterminedfromcashflowsAlso,asummaryofcashflowsrevealsvirtuallynothingaboutthefinancialconditionofabusinessFinancialconditionreferstotheassetsofthebusinessmatchedagainstitsliabilitiesattheendoftheperiodForexample:Howmuchcashdoesthecompanyhaveinitscheckingaccount(s)attheendoftheyearWecanseethatoverthecourseoftheyearthebusinessdecreaseditscashbalance$,Butwecan'ttellfromExhibitAthecompany'sendingcashbalanceAcashflowssummarydoesnotreporttheamountsofassetsandliabilitiesofthebusinessattheendoftheperiodPageProfitCannotBeMeasuredbyCashFlowsThecompanyinthisexamplesellsitsproductsoncreditInotherwords,thebusinessoffersitscustomersashortperiodoftimetopayfortheirpurchasesMostofthecompany'ssalesaretootherbusinesses,whichdemandcredit(Incontrast,mostretailerssellingtoindividualsacceptcreditcardsinsteadofextendingcredittotheircustomers)Inthisexamplethecompanycollected$,,fromitscustomersduringtheyearHowever,someofthismoneywasreceivedfromsalesmadeinthepreviousyearAnd,somesalesmadeoncreditintheyearjustendedwerenotcollectedbytheendoftheyearAtyearendthecompanyhadreceivablesfromsalesmadetoitscustomersduringthelatterpartoftheyearThesereceivableswillbecollectedearlynextyearBecausesomecashwascollectedfromlastyear'ssalesandsomecashwasnotcollectedfromsalesmadeintheyearjustended,thetotalcashcollectedduringtheyeardoesnotequaltheamountofsalesrevenuefortheyearCashdisbursements(payments)duringtheyeararenotthecorrectamountsformeasuringexpensesLikesalesrevenue,thecashflowduringtheyearisnotthewholestoryThecompanypaidout$,,formanufacturingcostsduringtheyear(seeExhibitA)Atyearend,however,manyproductswerestillonhandininventoryTheseproductshadnotyetbeensoldbyyearendOnlythecostofproductssoldanddeliveredtocustomersduringtheyearshouldbedeductedasexpensefromsalesrevenuetomeasureprofitDon'tyouagreeFurthermore,someofitsmanufacturingcostshadnotyetbeenpaidbytheendoftheyearThecompanybuysoncredittherawmaterialsusedinmanufacturingitsproductsandtakesseveralweekstopayitsbillsThecompanyhasliabilitiesatyearendforrecentrawmaterialpurchasesandforothermanufacturingcostsaswellThere'smoreItscashpaymentsduringtheyearforoperatingexpenses,aswellasforinterestandincometaxexpenses,arenotthecorrectamountstomeasureprofitfortheyearThecompanyhasliabilitiesattheendoftheyearforunpaidexpensesThecasholowamountsshowninExhibitAdonotincludetheseadditionalamountsofunpaidexpensesattheendoftheyearInshort,cashflowsfromsalesrevenueandforexpensesarenotthecorrectamountsformeasuringprofitforaperiodoftimeCashflowstakeplacetoolateortooearlyforcorrectlymeasuringprofitforaperiodCorrecttimingisneededtorecordsalesrevenueandexpensesintherightperiodThecorrecttimingofrecordingsalesrevenueandexpensesiscalledaccrualbasisaccountingAccrualbasisaccountingrecognizesreceivablesfrommakingsalesoncreditandrecognizesliabilitiesforunpaidexpensesinordertodeterminethecorrectprofitmeasurefortheperiodAccrualbasisaccountingalsoisnecessarytodeterminethefinancialconditionofabusinesstorecordtheassetsandliabilitiesofthebusinessPageCashFlowsDoNotRevealFinancialConditionThecashflowssummaryfortheyear(ExhibitA)doesnotrevealthefinancialconditionofthecompanyManagerscertainlyneedtoknowwhichassetsthebusinessownsandtheamountsofeachasset,includingcash,receivables,inventory,andallotherassetsAlso,theyneedtoknowwhichliabilitiesthecompanyowesandtheamountsofeachBusinessmanagershavetheresponsibilityforkeepingthecompanyinapositiontopayitsliabilitieswhentheycomeduetokeepthebusinesssolvent(abletopayitsliabilitiesontime)Furthermore,managershavetoknowwhetherassetsaretoolarge(ortoosmall)relativetothesalesvolumeofthebusinessItslendersandinvestorswanttoknowthesamethingsaboutabusinessInbrief,boththemanagersinsidethebusinessandlendersandinvestorsoutsidethebusinessneedasummaryofacompany'sfinancialcondition(itsassetsandliabilities)Ofcourse,theyneedaprofitperformancereportaswell,whichsummarizesthecompany'ssalesrevenueandexpensesanditsprofitfortheyearAcashflowsummaryisveryusefulInfact,aslightlydifferentversionofExhibitAisoneofthethreeprimaryfinancialstatementsreportedbyeverybusinessButinnosensedoesthecashflowsreporttaketheplaceoftheprofitperformancereportandthefinancialconditionreportThenextchapterintroducesthesetwofinancialstatements,or"sheets,"assomepeoplecallthemAFinalNotebeforeMovingon:OverthepastcenturyanentireprofessionhasdevelopedbasedonthepreparationandreportingofbusinessfinancialstatementstheaccountingprofessionInmeasuringtheirprofitandinreportingtheirfinancialaffairs,allbusinesseshavetofollowestablishedrulesandstandards,whicharecalledgenerallyacceptedaccountingprinciplesorGAAPforshortI'llsayalotmoreaboutGAAPandtheaccountingprofessioninlaterchaptersPageIntroducingtheBalanceSheetandIncomeStatementPageReportingFinancialConditionandProfitPerformanceBusinessmanagers,lenders,andinvestorsneedtoknowthefinancialconditionofabusinessTheyneedareportthatsummarizesitsassetsandliabilities,aswellastheownershipinterestsintheexcessofassetsoverliabilitiesAnd,theyneedtoknowtheprofitperformanceofthebusinessTheyneedareportthatsummarizessalesrevenueandexpensesforthemostrecentperiodandtheresultingprofitorlossChapterexplainsthatasummaryofcashflows,thoughveryusefulinitsownright,doesnotprovideinformationabouteitherthefinancialconditionortheprofitperformanceofabusinessFinancialconditioniscommunicatedinanaccountingreportcalledthebalancesheet,andprofitperformanceispresentedinanaccountingreportcalledtheincomestatementAlternativetitlesforthebalancesheetinclude"statementoffinancialcondition"or"statementoffinancialposition"Anincomestatementmaybetitled''statementofoperations"or''earningsstatement"We'llstickwiththenamesbalancesheetandincomestatementtobeconsistentthroughoutthebookTheterm"financialstatements,"intheplural,generallyreferstoacompletesetincludingabalancesheet,anincomestatement,andacashflowsstatementInformally,financialstatementsarecalledjust"financials"FinancialstatementsaresupplementedwithfootnotesandsupportingschedulesThebroaderterm"financialreport"usuallyreferstoallthis,plusanyadditionalnarrativeandgraphicsthataccompanythefinancialstatementsandtheirsupplementaryfootnotesandschedulesExhibitBonpagepresentsthebalancesheetforthecompanyexampleintroducedinChapter,andExhibitConthefollowingpagepresentstheincomestatementforitsmostrecentyearItsformalcashflowstatementfortheyearisdiscussedinChaptersandthesummaryofcashflowsforthecompanypresentedinChapterhastobemodifiedslightlyaswe'llseelaterTheformatandcontentofthetwoprimaryfinancialstatementsasshowninExhibitsBandCapplytomanufacturers,wholesalers,andretailersbusinessesthatmakeorbuyproductsthataresoldtotheircustomersAlthoughthefinancialstatementsofservicebusinessesthatdon'tsellproductsaresomewhatdifferent,ExhibitsBandCillustratethegeneralframeworkofbalancesheetsandincomestatementsforallbusinessesSideNote:Theterm"profit"isavoidedinincomestatements"Profit"comesacrosstomanypeopleasgreedyormercenaryAlso,thetermsuggestsanexcessorasurplusoverandabovewhat'snecessaryIshouldpointoutth

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