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Index
Title
Contents
Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organised
Icons Used in This Book
Where to Go from Here
Part I : Getting Down to Financial Reporting Basics
Chapter 1: Discovering What Reports Reveal
Finding Out What Financial Reporting Is For
Looking at Different Types of Reporting
Dissecting the Annual Report for Shareholders
Understanding How the Number Crunchers Are Kept in Line
Chapter 2: Recognising Different Business Types
Flying Solo: Sole Traders
Joining Forces: Partnerships
Shielding Your Assets: Public and Private Limited Companies
Seeking Protection with Limited Liability Partnerships
Chapter 3: Discovering How Company Structure Affects the Books
Investigating Private Companies
Understanding Public (Listed) Companies
A Whole New World: How a Company Goes from Private to Public
Chapter 4: Digging into Accounting Basics
Making Sense of the Accounting Method
Understanding Debits and Credits
Digging into Depreciation and Amortisation
Checking Out the Chart of Accounts
Differentiating Profit Types
Part II : Understanding Published Information: Annual Reports
Chapter 5: Exploring the Anatomy of an Annual Report
Meeting the Basic Parts of an Annual Report
Everything but the Numbers
Presenting the Financial Picture
Summarising the Financial Data
Chapter 6: Balancing Assets against Liabilities and Equity
Understanding the Balance Equation
Introducing the Balance Sheet
Assessing Assets
Looking at Liabilities
Navigating the Equity Maze
Chapter 7: Using the Income Statement
Introducing the Income Statement
Delving into the Tricky Business of Revenues
Acknowledging Expenses
Sorting Out the Profit and Loss Types
Calculating Earnings Per Share
Chapter 8: The Statement of Cash Flows
Digging into the Statement of Cash Flows
Checking Out Operating Activities
Investigating Investing Activities
Understanding Financing Activities
Recognising Special Line Items
Adding It All Up
Chapter 9: Scouring the Notes to the Financial Statements
Deciphering the Small Print
Accounting Policies Note: Laying Out the Rules of the Road
Working Out Financial Borrowings and Other Liabilities
Accounting for Share-Based Payment: Something New in the Accountants’ World
Mergers and Acquisitions: Noteworthy Information
Pondering Pension and Retirement Benefits
Breaking Down Business Breakdowns
Reviewing Significant Events
Finding the Red Flags
Chapter 10: Considering Consolidated Financial Statements
Getting a Grip on Consolidation
Looking at Methods of Buying Up Companies
Reading Consolidated Financial Statements
Looking to the Notes
Part III : Analysing the Numbers
Chapter 11: Testing the Profits and Market Value
The Price/Earnings Ratio
Dividend Yield and Cover
Return on Sales
Return on Assets
Return on Equity
The Big Three: Margins
Chapter 12: Looking at Liquidity
Finding the Current Ratio
Determining the Quick Ratio
Investigating Income Gearing
Comparing Debt to Shareholders’ Equity
Determining Debt-to-Capital Ratio
Chapter 13: Making Sure the Company Has Cash to Carry On
Measuring Income Success
Checking Out Debt
Calculating Cash-Flow Coverage
Part IV : Understanding How Companies Optimise Operations
Chapter 14: Using Basic Budgeting
Peering Into the Budgeting Process
Building Budgets
Providing Monthly Budget Reports
Using Internal Reports
Chapter 15: Turning Up Clues in Turnover and Assets
Exploring Inventory Valuation Methods
Applying Inventory Valuation Methods
Determining Inventory Turnover
Investigating Tangible Fixed Assets Turnover
Tracking Total Asset Turnover
Chapter 16: Examining Cash Inflow and Outflow
Assessing Trade-Receivable Turnover and Average Collection Period
Taking a Close Look at Customer Accounts
Finding the Accounts-Payable Turnover Ratio
Determining the Number of Days in Accounts-Payable Ratio
Deciding Whether Discount Offers Make Good Financial Sense
Chapter 17: How Companies Keep the Cash Flowing
Slowing Down Bill Payments
Collecting Accounts Receivables Faster
Borrowing on Receivables
Reducing Inventory
Getting Cash More Quickly
Part V : The Many Ways Companies Answer to Stakeholders
Chapter 18: Finding Out How Companies Find Errors: The Auditing Process
Meeting Mr or Ms Auditor
Delving Into the Auditing Process
Filling the GAAP
Chapter 19: Checking Out the Analyst–Company Connection
Typecasting the Analysts
Regarding Bond Rating Agencies
Delving Into Share Rating
Looking at How Companies Talk to Analysts
Chapter 20: How Companies Soothe the Shareholders
Knowing What to Expect from an Annual General Meeting
Culling Information from the Annual General Meeting
Checking Out How the Board Runs the Company
Speaking Out at Meetings: Proxy Votes
Catching Up on Corporate Actions
Staying Up-to-Date Using Company Web Sites
Chapter 21: Keeping Score When Companies Play Games with Numbers
Getting to the Bottom of Creative Accounting
Unearthing the Games Played with Earnings
Exploring Exploitations of Expenses
Finding Funny Business in Assets and Liabilities
Playing Detective with Cash Flow
Part VI : The Part of Tens
Chapter 22: Ten Financial Crises That Rocked the World
Enron: Be Cautious of Explosive Growth
Adelphia and Hollinger: Be Wary of Lavish Lifestyles
WorldCom/MCI: If It Looks too Good to Be True . . .
Parmalat: Keep It Simple
Independent Insurance: Unreliable Info, Higher Risk
Versailles: Don’t Follow the Money-Go-Round
Barings Bank: Security, Accuracy, and Incompetence
Equitable Life: Spread Your Pension Bets
Robert Maxwell: Unfit to Lead
Northern Rock: Financial Problems Without Wrongdoing
Chapter 23: Ten Signs That a Company’s in Trouble
Lower Liquidity
Low Cash Flow
Disappearing Profit Margins
Revenue Game-Playing
Too Much Debt
Unrealistic Values for Assets and Liabilities
A Change in Accounting Methods
Questionable Mergers and Acquisitions
Slow Inventory Turnover
Slow-Paying Customers
Chapter 24: Ten Top-Notch Online Resources
Companies House
IASB
Yahoo! Finance UK
Standard & Poor’s
Biz/ed
Financial Times
Accounting Web: ICC
Find
Department of Business, Enterprise and Regulatory Reform
Reuters
Part VII : Appendixes
Appendix A: Financial Statements
Appendix B: Glossary
: Further Reading
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