Introduction to Financial Analysis

by Kenneth S. Bigel

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Financial Analysis, by and large, incorporates Accounting concepts. Thus, it is imperative that the analyst understand the numbers, which s/he will utilize in his/her analysis. This text exposes the reader to the many shortcomings in reading Financial Statements. No prior knowledge of Accounting is assumed. The text will lead the reader through the arcane world of Accounting and point out the many shortcomings in reading the statements and in conducting elementary Financial Analysis.

Description from LibreTexts.

Publisher
Touro University
Subjects
Business, Finance
Licence
CC BY 4.0, as LibreTexts states it
Who can read
Tweens profiles and older, judged from its title and subjects

Contents

LibreTexts writes equations in TeX, and here they show as TeX; the PDF has them typeset.

  1. Front Matter
  2. TitlePage
  3. InfoPage
  4. Table of Contents
  5. About the Author
  6. Licensing
  7. Author's Acknowledgements
  8. Preface
  9. Open Touro Acknowledgements
  10. I: Financial Statements and Ratio Analysis, and Forecasting
  11. 1: Introduction
  12. 1.1: Chapter One- Learning Outcomes
  13. 1.2: The Corporation
  14. 1.3: Business / Corporate Structure- The Management Organization
  15. 1.4: The Finance Function Within the Corporation
  16. 1.5: Capital Structure
  17. 1.6: Thinking Like an Economist- Abstraction
  18. 1.7: Abstraction- Absurd AND Necessary
  19. 1.8: Modes of Reasoning- Dialectical versus Analytic
  20. 1.9: Finance Style
  21. 2: Financial Statements Analysis- The Balance Sheet
  22. 2.1: Chapter Two- Learning Outcomes
  23. 2.2: The Finance in the Financial Statements
  24. 2.3: The Balance Sheet
  25. 2.4: Sample Bookkeeping Entries
  26. 2.5: Current Assets - Inventory and Accounts Receivable
  27. 2.6: Financial Claims Hierarchy
  28. 2.7: Interest Paid on Bonds and Dividends Paid on Stock
  29. 2.8: Bankruptcy
  30. 2.9: The Balance Sheet, Net Income, and the Common Shareholder
  31. 2.10: Corporate Goals
  32. 2.11: Words and Numbers (An Aside)
  33. 2.12: Chapter 2 Review Questions
  34. 3: Financial Statements Analysis- The Income Statement
  35. 3.1: Chapter Three- Learning Outcomes
  36. 3.2: The Income Statement
  37. 3.3: On Learning and Studying
  38. 3.4: Financial Statements- Interpretation
  39. 3.5: The Audit
  40. 3.6: Perpetual Inventory Accounting
  41. 3.7: Periodic Inventory Analysis- Ending Inventory and Cost of Goods Sold
  42. 3.8: Units to Numbers- FIFO and LIFO
  43. 3.9: Inventory Costing Calculations- A Closer Look at the COGS and Ending Inventory Computations
  44. 3.10: Inventory Accounting Issues- LIFO
  45. 3.11: LIFO Base Illustration
  46. 3.12: Accounting for Long-term Assets- Straight-Line Depreciation (For Reporting Purposes Only)
  47. 3.13: Accounting Entries for Depreciation
  48. 3.14: Accelerated Depreciation Methods- Sum-of-the-Years' Digits (For reporting purposes only)
  49. 3.15: Accelerated Depreciation Methods- Double/Declining Balance (For reporting purposes only)
  50. 3.16: Comparative Summary of Depreciation Methods
  51. 3.17: The Balance Sheet versus the Income Statement- A Summary
  52. 3.18: Chapter Three- Review Questions
  53. 4: Financial Statements and Finance
  54. 4.1: Chapter Four- Learning Outcomes
  55. 4.2: Accounting versus Finance
  56. 4.3: Earnings Management- Accrual, Real, and Expectations Management
  57. 4.4: Business Ethics- Examples of Fraudulent Revenue Recognition
  58. 4.5: Business Ethics- Examples of Fraudulent Expense Recognition
  59. 4.6: Chapter 4- Review Questions
  60. II: Ratio Analysis and Forecasting Modeling
  61. 5: Financial Ratios and Forecasting; Liquidity and Solvency Ratios
  62. 5.1: Chapter Five- Learning Outcomes
  63. 5.2: Financial Ratios and Forecasting
  64. 5.3: Financial Ratios
  65. 5.4: Longitudinal vs. Cross-sectional Analysis (Example)
  66. 5.5: Liquidity and Liquidity Ratios
  67. 5.6: The Income Statement versus the Balance Sheet
  68. 5.7: Accounts Receivable Aging Schedule
  69. 5.8: Solvency Ratios
  70. 6: Profitability and Return Ratios, and Turnover
  71. 6.1: Chapter Six- Learning Outcomes
  72. 6.2: Profitability, Return and Asset Turnover Ratios
  73. 6.3: The DuPont Model
  74. 6.4: What Does the Dupont Model Show Us?
  75. 6.5: Financial Ratios in Action
  76. 7: Market Ratios
  77. 7.1: Chapter Seven- Learning Outcomes
  78. 7.2: Market Ratios
  79. 7.3: Earnings Retention and Growth
  80. 7.4: The P/BV and P/E Ratios
  81. 7.5: Ratio Analysis Exercise
  82. 7.6: Solution Template for Ratio Analysis Problem
  83. 7.7: Solution for Ratio Analysis Problem
  84. 7.8: Adjustments to Basic Financial Ratios for Companies That Have Preferred Stock
  85. 7.9: Exhibit of Effect of Preferred Stock on Earnings Retention
  86. 7.10: Industry Data Benchmarks
  87. 7.11: Some Limitations of Financial Ratios
  88. 7.12: Chapters 5 - 7- Review Questions
  89. 8: Cash Flow, Depreciation, and Financial Projections
  90. 8.1: Chapter Eight- Learning Outcomes
  91. 8.2: Pro Forma Financial Analysis- The Corporate Environment
  92. 8.3: Pro-Forma (Projected) Cash Flow Analysis
  93. 8.4: Incrementalism
  94. 8.5: Corporate Forecasting and Strategic Planning
  95. 8.6: Forecasting Solution
  96. 8.7: The Tax Effect of Depreciation
  97. 9: Corporate Forecasting Models
  98. 9.1: Chapter Nine- Learning Outcomes
  99. 9.2: Free Cash Flow
  100. 9.3: Free Cash Flow Exercises
  101. 9.4: External Funds Needed Formula (EFN)
  102. 9.5: Internal and External Funds (Summary)
  103. 9.6: The EFN Formula Explained
  104. 9.7: EFN Application
  105. 9.8: EFN Solution
  106. 9.9: Summary- The Fundamentals of Accounting and Financial Analysis
  107. 9.10: Chapters Eight and Nine- Review Questions
  108. III: The Time Value of Money
  109. 10: The Time Value of Money- Simple Present- and Future-Values
  110. 10.1: Chapter Ten- Learning Outcomes
  111. 10.2: The Time Value of Money and Interest
  112. 10.3: Interest-on-the-Interest- The Nature of Compound Interest
  113. 10.4: Some More Simple TVM Problems
  114. 10.5: Simple Future and Present Values (Formulas)
  115. 10.6: Compounding Frequency Assumption
  116. 10.7: Simple Future and Present Values- Continuous Compounding (Supplemental)
  117. 10.8: Characteristics of the Time Value of Money- FV and PV
  118. 10.9: Future and Present Value Factors (Multipliers)
  119. 10.10: A Word on Compounding Frequency and Annual Equivalent Rates
  120. 10.11: Interpolation
  121. 10.12: Interpolation Illustrated
  122. 10.13: Some TVM Practice Questions
  123. 10.14: The Volatility of the Time Value of Money
  124. 10.15: The First and Second Derivatives Illustrated
  125. 11: The Time Value of Money- Annuities, Perpetuities, and Mortgages
  126. 11.1: Chapter Eleven- Learning Outcomes
  127. 11.2: Annuities
  128. 11.3: The Derivation of (Ordinary) Annuity Factors
  129. 11.4: The Derivation of Annuity Factors (Solution)
  130. 11.5: Future and Present Annuity Values- The Nature of Their Cash Flows
  131. 11.6: Future and Present Annuity Factors- Mathematical Formulas
  132. 11.7: Characteristics of Annuity Factors- A Review
  133. 11.8: Annuities- Practice Problems
  134. 11.9: Annuities Due
  135. 11.10: Annuities Due (Solutions)
  136. 11.11: Adjustment from Ordinary Annuity to Annuity Due
  137. 11.12: Uneven Cash Flows
  138. 11.13: Uneven Cash Flows (Solutions)
  139. 11.14: Uneven Cash Flows (Practice Problem)
  140. 11.15: Uneven Cash Flows (Practice Problem Solutions)
  141. 11.16: Uneven Cash Flows- Another Self-Test Practice Problem
  142. 11.17: Solution to Another Uneven Cash Flow Practice Problem
  143. 11.18: Perpetuities- No-Growth Perpetuities
  144. 11.19: The “Law of Limits” and Perpetuities
  145. 11.20: Growth Perpetuities
  146. 11.21: Fractional Time Periods
  147. 11.22: Loans- The Conventional Mortgage
  148. 11.23: A Few Thoughts about Mortgages
  149. 11.24: Summary Comparison of 15- and 30-Year Mortgages
  150. 11.25: Personal Financial Planning Problem
  151. 11.26: Summary- The Time Value of Money
  152. 11.27: Chapters 10 - 11- Review Questions
  153. IV: Interest Rates, Valuation, and Return
  154. 12: Fixed Income Valuation
  155. 12.1: Chapter Twelve- Learning Outcomes
  156. 12.2: Security Return- The Holding Pattern Return (Raw Calculation)
  157. 12.3: Valuation Premise
  158. 12.4: Fixed Income Securities- Bond Components and Valuation Formula
  159. 12.5: Fixed Income Securities- Dollar Price and Yield-to-Maturity
  160. 12.6: Bond Dollar Prices- Discount, Par, and Premium
  161. 12.7: The True Price of a Bond
  162. 13: Interest Rates
  163. 13.1: Chapter Thirteen- Learning Outcomes
  164. 13.2: Interest Rates- Returns to Investors; Cost to the Corporation
  165. 13.3: Inside the Banker’s Brain
  166. 13.4: Fixed Income Risks
  167. 13.5: Interest Rate and Reinvestment Rate Risks
  168. 13.6: Credit Ratings
  169. 13.7: The Yield Curve
  170. 13.8: The Term Structure of Interest Rates- Four Yield Curve Theories
  171. 13.9: Credit Spreads
  172. 13.10: High Yield Securities- Junk Bonds and Other Speculative Securities
  173. 13.11: Summary- Interest Rates, the Corporation, and Financial Markets
  174. 14: Equity Valuation and Return Measurement
  175. 14.1: Chapter Fourteen- Learning Outcomes
  176. 14.2: The Philosophy of Equity Valuation
  177. 14.3: Equity Valuation
  178. 14.4: The Dividend Discount Model (DDM)- Fixed Dividend or No- Growth Version
  179. 14.5: The Dividend Discount Model (DDM)- Constant Growth Version
  180. 14.6: Dividend Discount Model (DDM) (Problems)
  181. 14.7: Dividend Discount Model (Solutions)
  182. 14.8: What About Quarterly Dividends?
  183. 14.9: Components of the Dividend Discount Model
  184. 14.10: A Closer Look at Dividend Growth
  185. 14.11: Summary of DDM Variables' Sources
  186. 14.12: Value Prediction Problem
  187. 14.13: A Qualitative Look at The Discount Rate
  188. 14.14: Business Ethics - The Small Investor's Experience of Insider Trading
  189. 14.15: Capital Gains
  190. 14.16: Portfolio Return (Weighted Averages)
  191. 14.17: The Geometric Average Return- Multi-year Returns
  192. 14.18: Chapters 12-14- Review Questions
  193. Back Matter
  194. Index
  195. Glossary
  196. Detailed Licensing