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| About the Authors | |
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| Preface | |
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| Introduction to Accounting | |
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| What Is Accounting? | |
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| Why Is Accounting Important? | |
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| Making Corporate Decisions | |
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| Making Investment Decisions | |
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| Accounting Facilitates Corporate and Investment Decisions | |
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| Who Uses Accounting? | |
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| U.S. Accounting Regulations | |
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| Generally Accepted Accounting Principles | |
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| Overview of the Securities and Exchange Commission | |
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| Overview of the Financial Accounting Standards Board | |
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| International Accounting Regulations | |
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| Convergence of U.S. GAAP and IFRS | |
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| Summary | |
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| Basic Accounting Principles | |
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| Assumptions | |
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| Accounting Entity | |
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| Going Concern | |
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| Measurement and Units of Measure | |
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| Periodicity | |
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| Wrap-up: Assumptions | |
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| Principles | |
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| Historical Cost | |
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| Accrual Basis | |
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| Full Disclosure | |
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| Wrap-up: Principles | |
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| Constraints | |
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| Estimates and Judgments | |
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| Materiality | |
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| Consistency | |
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| Conservatism | |
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| Summary | |
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| Financial Reporting | |
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| Financial Reporting Overview | |
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| Finding Financial Reports | |
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| Form 10-K (Annual Filing) | |
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| Why Is the 10-K Important? | |
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| Form 10-Q (Quarterly Filing) | |
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| Other Important Filings | |
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| Form 8-K | |
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| Form S-1 | |
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| Form 14A | |
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| Form 20-F | |
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| Summary | |
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| Reading the Annual Report | |
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| Introduction | |
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| Letter to Stockholders | |
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| Financial Highlights | |
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| Management's Discussion and Analysis | |
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| Financial Statements | |
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| Income Statement | |
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| Balance Sheet | |
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| Cash Flow Statement | |
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| Notes to Consolidated Statements | |
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| Report of Management's Responsibilities | |
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| Certification of Financial Statements | |
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| Risk Factors | |
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| Legal Proceedings | |
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| Report of Independent Auditors | |
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| Directors and Officers | |
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| Summary | |
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| Income Statement | |
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| What is the Income Statement? | |
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| Why Is It Important? | |
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| Revenues | |
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| Not All Income Is Revenue | |
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| Bad Debt Expense | |
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| What Is Bad Debt Expense? | |
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| Revenue Recognition: To Recognize and When? | |
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| Revenue Recognition: Long-Term Projects | |
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| Expense Recognition and Accrual Basis of Accounting | |
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| Basic Principles Revisited: Accrual Basis of Accounting and Matching Principle | |
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| Putting It All Together: The Accrual Basis of Accounting | |
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| Why Use Accrual Accounting? | |
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| Accrual versus Cash Accounting: What's the Difference? | |
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| Revenue Manipulation | |
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| Cost of Goods Sold | |
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| COGS Do Not Include Administrative Costs | |
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| Gross Profit | |
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| Selling, General and Administrative | |
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| Research and Development | |
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| Stock Options Expense | |
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| Depreciation Expense | |
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| Depreciation Is a "Phantom" Noncash Expense | |
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| Straight-Line Depreciation Method | |
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| Accelerated Depreciation Methods | |
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| Depreciation Methods Compared | |
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| Amortization | |
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| Amortization Is a "Noncash" Expense (Like Depreciation) | |
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| What Is the Difference between Depreciation and Amortization? | |
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| Summary | |
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| Goodwill | |
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| Goodwill Not Amortized after 2001 | |
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| Interest Expense | |
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| Interest Income | |
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| Other Nonoperating Income | |
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| Income Tax Expense | |
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| Equity Income in Affiliates | |
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| Minority Interest | |
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| Net Income | |
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| Shares Outstanding | |
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| Representation of Shares Outstanding in the Income Statement | |
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| Common Dividends | |
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| Preferred Dividends | |
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| Earnings per Share | |
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| Nonrecurring Items | |
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| Unusual or Infrequent Items | |
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| Discontinued Operations | |
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| Extraordinary Items | |
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| Accounting Changes | |
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| Earnings before Interest, Taxes, Depreciation, and Amortization | |
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| EBITDA: Popular Measure of a Company's Financial Performance | |
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| EBITDA Has Several Shortcomings | |
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| EBIT | |
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| Summary | |
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| Balance Sheet | |
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| Introduction | |
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| Assets Represent the Company's Resources | |
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| Liabilities and Shareholders' Equity Represent the Company's Sources of Funds (i.e., How It Pays for Assets) | |
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| Lemonade Stand and the Accounting Equation | |
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| Balance Sheet | |
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| Double-Entry Accounting | |
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| Why Is Double-Entry Accounting Important? | |
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| Income Statement Revisited: Links to Balance Sheet | |
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| Retained Earnings: The Link Between Balance Sheet and Income Statement | |
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| Impact of Revenues on the Balance Sheet | |
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| Impact of COGS on the Balance Sheet | |
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| Impact of SG&A on the Balance Sheet | |
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| Impact of Depreciation on the Balance Sheet | |
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| Impact of Interest Expense on the Balance Sheet | |
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| Impact of Tax Expense on the Balance Sheet | |
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| Total Impact of the Year on the Balance Sheet | |
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| Summary | |
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| Order of Liquidity | |
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| Current versus Noncurrent Assets | |
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| Current versus Long-Term Liabilities | |
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| Assets | |
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| Inventories | |
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| LIFO Reserve: The Link between FIFO and LIFO Inventory Methods | |
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| Writing Down Inventories | |
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| Deferred Taxes | |
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| PP&E, Net of Depreciation | |
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| Reconciliation of PP&E | |
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| Fixed Asset Impairments | |
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| Fixed Asset Retirement and Disposal | |
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| Intercompany Investments | |
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| Consolidation | |
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| Intangible Assets | |
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| Goodwill | |
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| Summary: Intangible Assets and Goodwill | |
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| Summary: Assets | |
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| Liabilities | |
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| Other Typical Current Liabilities | |
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| Debt | |
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| Short-Term Debt versus Long-Term Debt | |
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| Capital Leases | |
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| Operating Leases | |
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| Deferred Taxes | |
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| Summary: Deferred Taxes | |
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| Pensions | |
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| Defined Benefit Plan | |
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| Minority Interest | |
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| Summary: Liabilities | |
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| Shareholders' Equity | |
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| Introduction | |
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| Common Stock | |
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| Additional Paid-In Capital | |
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| Preferred Stock | |
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| Treasury Stock | |
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| Retained Earnings | |
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| Summary: Shareholders' Equity | |
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| Summary | |
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| Cash Flow Statement | |
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| Introduction | |
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| Cash Flow Statement to the Rescue! | |
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| Cash Flow from Operations | |
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| Overview | |
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| Indirect Method | |
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| Getting from Net Income to Cost from Operations | |
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| Depreciation | |
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| Working Capital | |
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| Changes in Accounts Receivable | |
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| Changes in Accounts Receivable and the Lemonade Stand | |
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| Changes in Inventories | |
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| Changes in Inventories and the Lemonade Stand | |
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| Changes in Accounts Payable | |
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| Accounts Payable and the Lemonade Stand | |
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| Changes in Other Current Assets | |
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| Changes in Other Current Liabilities | |
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| Increases/Decreases in Deferred Taxes | |
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| Summary: Cash Flow from Operations | |
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| Cash Flow from Investing Activities | |
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| Overview | |
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| Components | |
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| Cash Flow from Financing Activities | |
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| Overview | |
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| Components | |
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| How the Cash Flow is Linked to the Balance Sheet | |
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| Summary | |
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| Online Exercise | |
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| Financial Ratio Analysis | |
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| Introduction | |
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| What Is Financial Ratio Analysis? | |
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| Liquidity Ratios | |
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| Current Ratio | |
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| Quick (Acid) Test | |
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| Current Cash Debt Coverage Ratio | |
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| Profitability Ratios | |
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| Gross Profit Margin | |
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| Profit Margin on Sales | |
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| Return on Assets | |
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| Return on Equity | |
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| Earnings per Share | |
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| Price-to-Earnings Ratio | |
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| Payout Ratio | |
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| Activity Ratios | |
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| Receivables Turnover | |
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| Days Sales Outstanding | |
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| Inventory Turnover | |
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| Days Sales of Inventory | |
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| Asset Turnover | |
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| Coverage Ratios | |
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| Debt to Total Assets | |
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| Times Interest Earned | |
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| Cash Debt Coverage Ratio | |
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| Calculations | |
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| Stock Options | |
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| Stock Options Expensing | |
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| Then... | |
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| ...and Now | |
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| Debt | |
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| How Are These Two Forms of Capital Raised? | |
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| Who Issues Debt? | |
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| Long-Term Debt | |
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| Capital versus Operating Leases | |
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| Direct Method | |
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| Index | |