Best Way To Be A Millionaire

The Millionaires Brain

The Millionaires Brain, a masterpiece by Alvin Huang and Winter Valkois, is one of the few self-help programs that actually works.The Millionaires Brain is entirely different from the others. While other guides just provide textbook write-ups about whats going on, The Millionaires Brain just goes a step further. The Millionaires Brain Ebook will provide you with different strategies you that will be able to apply to any financial situation you have and be able to solve it and gain exceptional results. It is also a good go-to resource that will help you to set goals for yourself as well as becoming more motivated to budget to be able to grow in income. Many people think that there is no way to become a millionaire unless you come from a wealthy family, have incomparable skills, win the lottery, or you saw a crazy opportunity and took it. While this can be true it isnt exactly true in all cases, anyone could easily become a millionaire if that were all it took to becoming wealthy. The real way all of the people who are wealthy millionaires still have money to spare is they think like a millionaire. Read more here...

The Millionaires Brain Overview

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My The Millionaires Brain Review

Highly Recommended

I've really worked on the chapters in this book and can only say that if you put in the time you will never revert back to your old methods.

All the modules inside this book are very detailed and explanatory, there is nothing as comprehensive as this guide.

Financial Planning

What Is Financial Planning 82 Financial Planning Focuses on the Big Picture 83 Financial Planning Is Not Just Forecasting 84 Three Requirements for Effective Planning 84 Financial Planning Models 86 Components of a Financial Planning Model 87 An Example of a Planning Model 88 An Improved Model 89 The Role of Financial Planning Models 95

A Financial Advisory Practice

How to Value, Buy, or Sell a Financial-Advisory Practice In Search of the Perfect Model The Distinctive Business Strategies of Leading Financial Planners by Mary Rowland How to Value, Buy, or Sell a Financial-Advisory Practice How to value, buy, or sell a financial-advisory practice a manual on mergers, acquisitions, and transition planning Mark C. Tibergien and Owen Dahl. -- 1st ed. p. cm. 1. Financial planners--United States--Handbooks, manuals, etc. 2. Investment advi-sors--United States--Handbooks, manuals, etc. 3. Business enterprises--Valuation--United States--Handbooks, manuals, etc. 4. Sale of business enterprises--United States--Hand-books, manuals, etc. 5. Business enterprises--United States--Purchasing--Handbooks, manuals, etc. I. Dahl, Owen. II. Title.

Using Financial Statements

WHAT ARE FINANCIAL STATEMENTS A CASE STUDY Pat I estimate 80,000 for the beginning inventory, plus 36,000 for store signs, shelves, fixtures, counters, and cash registers, plus 24,000 working capital to cover operating expenses for about two months. That's a total of 140,000 for the startup. Kim How are you planning to finance the investment of the 140,000 Pat I can put in 100,000 from my savings, and I'd like to borrow the remaining 40,000 from the bank. Kim Suppose the bank lends you 40,000 on a one-year note, at 15 interest, secured by a lien on the inventory. Let's put together projected financial statements from the figures you gave me. Your beginning balance sheet would look like what you see on my computer screen Pat That's good news. I'm beginning to see how useful projected financial statements are for business planning. Can we look at the revised projected balance sheet now Pat Thanks. That makes sense. I really appreciate everything you've taught me about financial...

Building Wealth with Wise Investing

Earning and saving money are hard work, so you should be careful when it comes to investing what you've worked so hard to save (or waited so long to inherit ). In this part, I assist you with picking investments wisely and help you understand investment risks, returns, and a whole lot more. I explain all the major, and best, investment options. I recommend specific strategies and investments to use both inside and outside of tax-sheltered retirement accounts. I also discuss buying, selling, and investing in real estate, as well as other wealth-building investments.

Financial Statements Taxes and Cash Flow

In this chapter, we examine financial statements, taxes, and cash flow. Our emphasis is not on preparing financial statements. Instead, we recognize that financial statements are frequently a key source of information for financial decisions, so our goal is to briefly examine such statements and point out some of their more relevant features. We pay special attention to some of the practical details of cash flow.

Objective of financial statements

The International Accounting Standards Committee (IASC) has stated that the objective of financial statements is to provide information about the financial position, performance and capability of an enterprise that is useful to a wide range of users in making economic decisions.1 The IASC recognises that all the information needs of all users cannot be met by financial statements, but it takes the view that some needs are common to all users in particular, they have some interest in the financial position, performance and adaptability of the enterprise as a whole. This leaves open the question of which user is the primary target the IASC states that, as investors are providers of risk capital, financial statements that meet their needs would also meet the needs of other users.2 Stewardship role of financial statements In addition to assisting in making economic decisions, financial statements also show the results of the stewardship of management that is, the accountability of...

Financial Statements and Analysis

Accounting You need to understand the stockholders' report and preparation of the four key financial statements how firms consolidate international financial statements and how to calculate and interpret financial ratios for decision making. Information systems You need to understand what data are included in the firm's financial statements to design systems that will supply such data to those who prepare the statements and to those in the firm who use the data for ratio calculations. Management* You need to understand what parties are interested in the stockholders' report and why how the financial statements will be analyzed by those both inside and outside the firm to assess various aspects of performance the caution that should be exercised in using financial ratio analysis and how the financial statements affect the value of the firm. Marketing You need to understand the effects your decisions will have on the financial statements, particularly the income statement and the...

Financial Statements And Longterm Financial Planning

CHAPTER 3 Working with Financial Statements This chapter discusses different aspects of financial statements, including how the statement of cash flows is constructed, how to standardize financial statements, and how to determine and interpret some common financial ratios. CHAPTER 4 Long-Term Financial Planning and Growth Chapter 4 examines the basic elements of financial planning. It introduces the concept of sustainable growth, which can be a very useful tool in financial planning. Ross et al. Fundamentals I II. Financial Statements I 3. Working with Financial I I The McGraw-Hill of Corporate Finance, Sixth and Long-Term Financial Statements Companies, 2002 Ross et al. Fundamentals I II. Financial Statements I 3. Working with Financial I I The McGraw-Hill of Corporate Finance, Sixth and Long-Term Financial Statements Companies, 2002 Ross et al. Fundamentals I II. Financial Statements I 3. Working with Financial I I The McGraw-Hill of Corporate Finance, Sixth and Long-Term Financial...

Part Two Analyzing Financial Statements and Creating Management Financial Reports

Chapter 13, Analyzing Financial Statements Using PivotTable and PivotChart Reports, describes how to use PivotTable and PivotChart reports to analyze the company's Financial Statements. Chapter 14, Analyzing Financial Statements and Calculating the Ratio Analysis, introduces techniques for Financial Statement Analysis.

Working with Financial Statements

Price-to-earnings comparisons are examples of the use of financial ratios. As we will see in this chapter, there are a wide variety of financial ratios, all designed to summarize specific aspects of a firm's financial position. In addition to discussing how to analyze financial statements and compute financial ratios, we will have quite a bit to say about who uses this information and why. In chapter 2, we discussed some of the essential concepts of financial statements and cash flows. Part 2, this chapter and the next, continues where our earlier discussion left off. Our goal here is to expand your understanding of the uses (and abuses) of financial statement information. Financial statement information will crop up in various places in the remainder of our book. Part 2 is not essential for understanding this material, but it will help give you an overall perspective on the role of financial statement information in corporate finance. A good working knowledge of financial statements...

Taking the Pulse of a Business Financial Statements

I devote a good deal of space in this book to discussing financial statements In Chapter 2, I explain the fundamental information components of financial statements, and then Part II gets into the nitty-gritty details. Here, I simply want to introduce you to the three primary kinds of financial statements so you know from the get-go what they are and why they're so crucial. Financial statements are prepared at the end of each accounting period. A period may be one month, one quarter (three calendar months), or one year. Financial statements report summary amounts, or totals. Accountants seldom prepare a complete listing of the details of all the activities that took place during a period, or the individual items making up a total amount. Business managers occasionally need to search through a detailed list of all the specific transactions that make up a total amount. When they want to drill down into the details, they ask the accountant for the more detailed information. But this sort...

Standardized Financial Statements

The next thing we might want to do with Prufrock's financial statements is to compare them to those of other, similar, companies. We would immediately have a problem, however. It's almost impossible to directly compare the financial statements for two companies because of differences in size. For example, Ford and GM are obviously serious rivals in the auto market, but GM is much larger (in terms of assets), so it is difficult to compare them directly. For that matter, it's difficult to even compare financial statements from different points in time for the same company if the company's size has changed. The size problem is compounded if we try to compare GM and, say, Toyota. If Toyota's financial statements are denominated in yen, then we have a size and a currency difference. To start making comparisons, one obvious thing we might try to do is to somehow standardize the financial statements. One very common and useful way of doing this is to work with percentages instead of total...

Common Base Year Financial Statements Trend Analysis

Imagine we were given balance sheets for the last 10 years for some company and we were trying to investigate trends in the firm's pattern of operations. Does the firm use more or less debt Has the firm grown more or less liquid A useful way of standardizing financial statements in this case is to choose a base year and then express each item II. Financial Statements and Long-Term Financial Planning 3. Working with Financial Statements CHAPTER 3 Working with Financial Statements

Financial Statements and Accounting Standards

Fleshing out the three key financial statements Noting the difference between profit and cash flow Finding answers in the financial statements Knowing who sets accounting standards rnf you read Chapter 1, you got a very brief introduction to the three primary business financial statements the income statement, the balance sheet, and the statement of cash flows. In this chapter, you get some juicy details. Then, in Part II, you really get the goods. Think back to when you learned to ride a bicycle. Chapter 1 is like getting on the bike and learning to keep your balance. In this chapter, you put on your training wheels and start riding. Then, when you're ready, the chapters in Part II explain all 21 gears of the financial statements bicycle, and then some.

Introducing the Information Content of Financial Statements

This chapter focuses on the basic information components of each financial statement reported by a business. In this first step, I do not address the classification, or grouping, of these information packets within each financial statement. The first step is to get a good idea of the information content reported in financial statements. The second step is to become familiar with the architecture, rules of classification, and other features of financial statements, which I explain in Part II of the book. To better illustrate the three primary financial statements, I need a realistic business example. The information content of its financial statements depends on the line of business a company is in in other words, which types of products and services it sells. The financial statements of a movie theater chain are different from those of a bank, which are different from those of an airline, which are different from an automobile manufacturer. Here, I use a fairly common type of business...

Points To Remember About Financial Statements

When Pat arrived home, she carefully reviewed the projected financial statements, then made notes about what she had learned. Therefore, all three financial statements are interrelated or, to use the technical term, articulated. They are mutually consistent, and that is why they are referred to as a set of financial statements. The three-piece set consists of a balance sheet, income statement, and cash flow statement. 16. A set of financial statements can convey much valuable information about the enterprise to anyone who knows how to analyze them. This information goes to the core of the organization's business strategy and the effectiveness of its management. While Pat was making her notes, Kim was carefully analyzing the Nutriv-ite projected financial statements in order to make her recommendation to the bank's loan committee about Nutrivite's loan application. She paid special attention to the Cash Flow Statement, keeping handy the bank's guidelines on cash flow analysis, which...

Problems with Financial Statement Analysis

We close out our chapter on financial statements by discussing some additional problems that can arise in using financial statements. In one way or another, the basic problem with financial statement analysis is that there is no underlying theory to help us identify which quantities to look at and to guide us in establishing benchmarks. As we discuss in other chapters, there are many cases in which financial theory and economic logic provide guidance in making judgments about value and risk. Very little such help exists with financial statements. This is why we can't say which ratios matter the most and what a high or low value might be. Ross et al. Fundamentals I II. Financial Statements I 3. Working with Financial I I The McGraw-Hill of Corporate Finance, Sixth and Long-Term Financial Statements Companies, 2002

Why Evaluate Financial Statements

Financial statement analysis is essentially an application of management by exception. In many cases, such analysis will boil down to comparing ratios for one business with some kind of average or representative ratios. Those ratios that seem to differ the most from the averages are tagged for further study. Internal Uses Financial statement information has a variety of uses within a firm. Among the most important of these is performance evaluation. For example, managers are frequently evaluated and compensated on the basis of accounting measures of performance such as profit margin and return on equity. Also, firms with multiple divisions frequently compare the performance of those divisions using financial statement information. Another important internal use that we will explore in the next chapter is planning for the future. As we will see, historical financial statement information is very useful for II. Financial Statements and Long-Term Financial Planning 3. Working with...

Appendix 2A Financial Statement Analysis

The objective of this appendix is to show how to rearrange information from financial statements into financial ratios that provide information about five areas of financial performance Financial statements cannot provide the answers to the preceding five measures of performance. However, management must constantly evaluate how well the firm is doing, and financial statements provide useful information. The financial statements of the U.S. Composite Corporation, which appear in Tables 2.1, 2.2, and 2.3, provide the information for the examples that follow. (Monetary values are given in millions.)

Can you trust the financial statement numbers Are the books cooked

Whether the financial statements are correct or not depends on the answers to two basic questions What can I tell you There are a lot of crooks and dishonest persons in the business world who think nothing of manipulating the accounting numbers and cooking the books. Also, organized crime is involved in many businesses. And I have to tell you that in my experience many businesses don't put much effort into keeping their accounting systems up to speed, and they skimp on hiring competent accountants. In short, there is a risk that the financial statements of a business could be incorrect and seriously misleading. To increase the credibility of their financial statements, many businesses hire independent CPA auditors to examine their accounting systems and records and to express opinions on whether the financial statements conform to established standards. In fact, some business lenders insist on an annual audit by an independent CPA firm as a condition of making the loan. The outside,...

Long Term Financial Planning and Growth

Financial planning establishes guidelines for change and growth in a firm. It normally focuses on the big picture. This means it is concerned with the major elements of a firm's financial and investment policies without examining the individual components of those policies in detail. 96 PART TWO Financial Statements and Long-Term Financial Planning Our primary goals in this chapter are to discuss financial planning and to illustrate the interrelatedness of the various investment and financing decisions a firm makes. In the chapters ahead, we will examine in much more detail how these decisions are made. We first describe what is usually meant by financial planning. For the most part, we talk about long-term planning. Short-term financial planning is discussed in a later chapter. We examine what the firm can accomplish by developing a long-term financial plan. To do this, we develop a simple, but very useful, long-range planning technique the percentage of sales approach. We describe...

Dimensions of Financial Planning

It is often useful for planning purposes to think of the future as having a short run and a long run. The short run, in practice, is usually the coming 12 months. We focus our attention on financial planning over the long run, which is usually taken to be the coming two to five years. This time period is called the planning horizon, and it is the first dimension of the planning process that must be established. In drawing up a financial plan, all of the individual projects and investments the firm will undertake are combined to determine the total needed investment. In effect, the smaller investment proposals of each operational unit are added up, and the sum is treated as one big project. This process is called aggregation. The level of aggregation is the second dimension of the planning process that needs to be determined. Once the planning horizon and level of aggregation are established, a financial plan requires inputs in the form of alternative sets of assumptions about...

Identifying Financial Statements

Refer to the information about financial statements below. Required For each item above, indicate the financial statement for which the information is true. Use I to indicate income statement, B to indicate balance sheet, C to indicate cash flow statement. If an item is not true for any of the three financial statements, indicate with an N.

Step 3 Determine Your Financial Goals

In order to set aside money for your financial future, you need to estimate the expenditures that go toward your savings and investments. Financial goals vary from person to person over time. Some financial goals are FIGURE 3.2 Mr. and Mrs. X's personal financial goals FIGURE 3.2 Mr. and Mrs. X's personal financial goals

Using the Internet for Personal Financial Planning

The answers to these questions are often complicated, and they depend on a number of factors, such as housing and education costs, interest rates, inflation, expected family income, and stock market returns. Hopefully, after completing this chapter, you will have a better idea of how to answer such questions. Moreover, there are a number of online resources available to help with financial planning.

Some Caveats Regarding Financial Planning Models

Financial planning models do not always ask the right questions. A primary reason is that they tend to rely on accounting relationships and not financial relationships. In particular, the three basic elements of firm value tend to get left out, namely, cash flow size, risk, and timing. Because of this, financial planning models sometimes do not produce output that gives the user many meaningful clues about what strategies will lead to increases in value. Instead, they divert the user's attention to questions concerning the association of, say, the debt-equity ratio and firm growth. In closing our discussion, we should add that financial planning is an iterative process. Plans are created, examined, and modified over and over. The final plan will be a result negotiated between all the different parties to the process. In fact, long-term financial planning in most corporations relies on what might be called the Procrustes approach.1 Upper-level management has a goal in mind, and it is...

Evaluating the Target III Analyzing the Financial Statements

T he heart and soul of any business can be found in its financial statements the balance sheet and the income statement, which is also referred to as the statement of profit and loss (P & L), or the statement of operations. Nobody would be foolish enough to buy a business without examining its financial statements (the books) beforehand. The trick is to understand what you're looking at. Scan the balance sheet and income statement of Houston Sash & Door, Inc. (Tables 4.1 and 4.2) for a few moments to get a feel for them we'll cover most of the entries in depth later.

Preparing Martin Manufacturings 2010 Pro Forma Financial Statements

Planned program is expected to lower the variable cost per unit of finished product. Terri Spiro, an experienced budget analyst, has been charged with preparing a forecast of the firm's 2010 financial position, assuming replacement and modernization of manufacturing equipment. She plans to use the 2009 financial statements presented on pages 98 and 99, along with the key projected financial data summarized in the following table.

What Is Financial Planning

Financial planning is a process consisting of 4. Measuring subsequent performance against the goals set forth in the financial plan. Notice that financial planning is not designed to minimize risk. Instead it is a process of deciding which risks to take and which are unnecessary or not worth taking.

Financial Planning Models

Financial planners often use a financial planning model to help them explore the consequences of alternative financial strategies. These models range from simple models, such as the one presented later, to models that incorporate hundreds of equations. Financial planning models support the financial planning process by making it easier and cheaper to construct forecast financial statements. The models automate an important part of planning that would otherwise be boring, time-consuming, and laborintensive. Programming these financial planning models used to consume large amounts of computer time and high-priced talent. These days standard spreadsheet programs such as Microsoft Excel are regularly used to solve complex financial planning problems.

Assume You Have All Your Wealth A Million Dollars Invested In The Vanguard 500 Index Fund And That You Expect To Earn

Assume you have all your wealth (a million dollars) invested in the Vanguard 500 index fund, and that you expect to earn an annual return of 12 , with a standard deviation in returns of 25 . Since you have become more risk averse, you decide to shift 200,000 from the Vanguard 500 index fund to treasury bills. The T.bill rate is 5 . Estimate the expected return and standard deviation of your new portfolio.

Notes To Financial Statements

The financial statements of a corporation contain information beyond that presented in the balance sheet, the income statement, the statement of cash flows, and the statement of shareholders' equity. This additional information is presented in the notes to these financial statements. The first note summarizes the company's accounting policies including the

The Role Of Financial Planning Models

We commented earlier that financial planners are concerned about unlikely events as well as likely ones. For example, Executive Fruit's manager may wish to consider how the company's capital requirement would change if profit margins come under pressure and the company generated less cash from its operations. Planning models make it easy to explore the consequences of such events. Self-Test 4 Which of the following questions will a financial plan help to answer

Accounting terminology versus financial planning model terminology

Before proceeding further, some comments on our use of terminology. While most of the terminology in this chapter follows the standard accounting nomenclature, some changes are necessary to accommodate the structure of financial planning models. For example, while accountants use current assets to denote both operating and financial short-term assets, financial planning models use current assets to mean only operating short-term assets (to emphasize this point, the terminology operating current assets is sometimes used). Similarly, in the accounting framework current liabilities includes both operational items (like accounts payable bills which are as yet unpaid by the firm) and financial items (like short-term debt and current portion of long term debt). Financial planning models use current liabilities to denote

The Purpose of Financial Statements

Accounting information may serve general and specific purposes. Financial statements are the primary means organizations use to report general-purpose accounting information to external decision makers. Most business organizations prepare three financial statements issued by businesses. Many corporations also prepare a statement of stockholders' equity because of the variety and complexity of their ownership transactions. This chapter examines the purpose and content of the income statement, the balance sheet, and the statement of stockholders' equity. Chapter F5 examines the statement of cash flows. Information contained in financial statements and in the notes accompanying the statements is the primary focus of financial accounting. Specific-purpose accounting reports and other information used by internal decision makers are subjects of managerial accounting. The form and content of financial statements evolved throughout the twentieth century and continue to change to meet user...

Ratios And Financial Planning At Ss Air

Chris Guthrie was recently hired by S& S Air, Inc., to assist the company with its financial planning, and to evaluate the company's performance. Chris graduated from college five years ago with a finance degree. He has been employed in the finance department of a Fortune 500 company since then. Mark and Todd have provided the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.

Financial Statements Forecasting

The objective of financial statements modeling, that is, creating pro forma financial statements, is to make financial projections for the future that can be used to make decisions. Financial statements models are probably the most widely used type of financial model and they are used extensively in corporate finance for planning, credit analysis, mergers and acquisitions analysis, business valuations, and many other applications. Financial statement models are especially useful to answer what if questions. Depending on the application, the models may be created for abbreviated financial statements or they may be created with extensive details including various supporting schedules that feed into the primary financial statements. Even for making minor decisions it is always safer to do projections with financial statement models instead of doing back-of-the-envelope calculations it significantly reduces the chances of leaving out certain items and making wrong projections.

Building a financial planning model

Now that we have our terminology straight, we can build our financial planning model for Whimsical Toenails. A typical financial planning model has three major components The model parameters. Also called the value drivers, a financial planning model's parameters include the major assumptions of the model. For example, we might assume that the sales growth parameter is 10 per year. Or we might assume that the current assets to sales parameter is 15 meaning that an increase of 1,000 in sales requires an additional 150 of current assets. Typically, financial-statement models are sales-driven this term means that many of the most important financial statement value drivers are assumed to be functions of the firm's sales. The financial policy assumptions. We will make assumptions about how the firm finances itself in the future. What is the mix between debt and new equity issued Does excess cash produced by the firm go towards repaying debt or does it end up in the firm's cash balances...

Use of Financial Statements

Financial statements are a primary source of accounting information for external decision makers. External users analyze statements to evaluate the ability of an organization to use its resources effectively and efficiently. By comparing changes in assets, liabilities, earnings, and cash flows over time, users form expectations about return and risk. Comparisons across companies help determine which companies are being managed effectively and provide the best investment opportunities. Later chapters of this book describe methods of analyzing and interpreting financial statements. The remainder of this chapter considers attributes of financial statements that decision makers should understand when interpreting them.

Interrelationships among Financial Statements

Taken as a whole, financial statements describe business activities that changed the financial condition of a company from the beginning to the end of a fiscal period. Information on the income statement and statement of cash flows explains changes in balance sheet accounts during a period. The summary information presented in financial statements does not always provide sufficient detail to explain the change in every balance sheet account. Access to individual account balances would be necessary to provide a complete explanation. Nevertheless, the relationships among the financial statements are important. Balance sheets for the beginning and ending of a fiscal period reveal changes in a company's resources and finances. The company's income statement and statement of cash flows reveal major events that caused these changes. The relationship among financial statements in which the numbers on one statement explain numbers on other statements is called articulation. You should...

Sign Convention and Formatting of Financial Statements

In preparing financial statements and associated schedules, you should consciously choose as consistent a sign convention for the various items as possible. Opinions differ on what is consistent, though, and that is why you find people using different conventions. For example, some people prefer to enter cost of sales as a negative number in which case it has to be added to sales to calculate gross operating income. In the models in this book, I have shown cost of sales as a positive number and, therefore, it has to be subtracted from sales. If you follow my approach, selling, general, and administrative expenses and depreciation (on the income statement) should also be shown as positive numbers in order to be consistent. For certain other items, what would be the consistent approach may not be clear. Make sure that you do not add a number that should be subtracted based on the convention you are using and vice versa. You should put some effort into making your financial statements...

Financial Statement Analysis

Ivide and conquer is the only practical strategy for presenting a complex topic like financial management. That is why we have broken down the financial manager's job into separate areas capital budgeting, dividend policy, equity financing, and debt policy. Ultimately the financial manager has to consider the combined effects of decisions in each of these areas on the firm as a whole. Therefore, we devote all of Part Six to financial planning. We begin by looking at the analysis of financial statements. Why do companies provide accounting information Public companies have a variety of stakeholders shareholders, bondholders, bankers, suppliers, employees, and management, for example. These stakeholders all need to monitor how well their interests are being served. They rely on the company's periodic financial statements to provide basic information on the profitability of the firm. In this material we look at how you can use financial statements to analyze a firm's overall performance...

Analyzing Financial Statements of Several Companies

5-59 Obtain recent financial statements for two or three companies.If possible,these companies should be in the same industry and they should use the same method in reporting their cash flows from operating activities. Ideally, they will all use the direct method, though it will be hard to identify three such companies in the same industry who are otherwise comparable.

P415 Using Interrelationships among Financial Statements

Objs. 2, 3, 4 Corey Issacson is an investor in Stone Cold Enterprises. Last week he received the company's *T most recent financial statements but some of the numbers were smudged and unreadable. Each of the unreadable numbers is represented with a letter on the following page.

Understanding Financial Statements

Financial Accounting is the language of business. Although this book is not about financial statements, you must understand both their logic and their fundamentals. They contain information about the cash flows you need for an NPV analysis, as well as a lot of other useful information. Without understanding accounting, you also cannot understand corporate income taxes, a necessary NPV input. This chapter begins with a simple hypothetical project. Its economics make computing NPV easy. It then explains how accountants would describe the project in a financial statement. This makes it easy for you to see the correspondence between the finance and the accounting descriptions. Finally, the chapter applies the same analysis to the financial statement of a real corporation, PepsiCo (PEP).

P418 The Transformation Process as Reported in Financial Statements

Explain how the various aspects of Far East Specialties' transformation process are reported in its financial statements. That is, consider the events just described and identify where information about each event is reported in the financial statements. In particular, consider the relationship the company has with its investors, suppliers, and customers.

P419 Limitations on Financial Statements

Obb. 5 Markus O'Realius is considering the purchase of Caesar Company. The potential seller has provided Markus with a copy of the business's financial statements for the last three years. The financial statements reveal total assets of 350,000 and total liabilities of 150,000. The seller is asking 300,000 for the business. Markus believes that the business is worth only about 200,000, the amount of owners' equity reported on the balance sheet. He has asked your assistance in determining a price to offer for the business. Required Write a memo to Markus explaining why he should not interpret the balance sheet as an accurate measure of the value of the business. Describe limitations of financial statements that might mean that the market value of the business was higher (or lower) than the financial statement amounts.

The financial planning process

The first part of the financial planning process is to assess the amount of capital that is required to meet the objectives of the business. Firstly, the total amount of capital is computed secondly, how much debt can be arranged is calculated, given the security the company can offer. The balance is the amount of equity that would be required.

Will the item provision no longer appear in financial statements

In some jurisdictions, some classes of liabilities are described as provisions, for example those liabilities that can be measured only by using a substantial degree of estimation. Although this draft Standard does not use the term 'provision', it does not prescribe how entities should describe their non-financial liabilities. Therefore, entities may describe some classes of non-financial liabilities as provisions in their financial statements.

Scouring the Notes to the Financial Statements

TM ould you ever sign an important contract without reading the fine WW print first I didn't think so. Remember this philosophy when you read financial statements because the corporate world certainly doesn't escape the clich about sweeping ashes under the rug. Hiding problems in the notes to the financial statements is a common practice for companies in trouble. In this chapter, I explain the role of the notes as part of the financial statements, I discuss the most common issues addressed in the notes, and I point out some key warning signs that should raise a red flag if you see them mentioned in the notes. And to help you become a note-reading expert, I refer to the financial reports of Hasbro and Mattel (both toy companies) throughout the chapter. (You can view their complete annual reports at www.hasbro. com and www.mattel.com.)

Initial accounting statements for a financial planning model

Financial planning models are predictions of what a firm's future financial statements will look like. To build such a model we start with the present the firm's current financial statements. To illustrate the process by which financial planning models are constructed, in the next section we will project five years of financial statements for Whimsical Toenails, a company which runs a chain of toenail-painting parlors. Whimsical's management and bankers want to project the firm's future performance, and we will help them by constructing a financial planning model.

Current assetswhats included in the financial planning model and whats not

In financial planning models the current assets category contains only items that are related to the operations of the firm. Here are several typical items that would be included in the financial planning model definition of current assets. Accounts receivable These are payments due from customers and are generated by the operations of the firm. Since accounts receivable are generated by the firm's sales, they are included in the operating current assets of the financial planning model. Inventories Inventories include both raw materials to be used for production and unsold finished products. Inventories are part of the operating current assets of the financial planning model. Prepaid expenses Prepaid expenses are costs which the firm pays before it actually receives the associated services. An example might be rent paid by the firm for future periods If the firm pays this rent in advance (for example, not month-by-month, but 6 months in advance), then this prepayment of the rent is...

Financial Planning Model The Ingredients

Most financial planning models require the user to specify some assumptions about the future. Based on those assumptions, the model generates predicted values for a large number of other variables. Models can vary quite a bit in terms of their complexity, but almost all will have the elements that we discuss next. Sales Forecast Almost all financial plans require an externally supplied sales forecast. In our models that follow, for example, the sales forecast will be the driver, meaning that the user of the planning model will supply this value, and most other values will be calculated based on it. This arrangement is common for many types of business planning will focus on projected future sales and the assets and financing needed to support those sales. 100 PART TWO Financial Statements and Long-Term Financial Planning Pro Forma Statements A financial plan will have a forecasted balance sheet, income statement, and statement of cash flows. These are called pro forma statements, or...

Consolidated Financial Statements

This chapter covers Napavale's consolidated financial statements the Balance Sheet, the Income Statement, and Statement of Cash Flows. Many readers may be familiar with these financial statements as they are widely used to assess a business's financial condition and the SEC (U.S. Securities and Exchange Commission) requires publicly traded companies to file these financial statements on a regular basis. As I covered the Balance Sheet in Chapter 7 and the Income Statement in Chapter 5, the majority of this chapter will be focused on the Statement of Cash Flows. I will, however, provide a review of the source of each line item in Napavale's Balance Sheet and Income Statement. By identifying the budget from which values flow into the Balance Sheet and Income Statement, I hope to provide some perspective on the interrelated nature of financial statements (and financial models in general).

Figuring Out Why Financial Statements Differ

Look at the third column on the right in Figure 7-1. These are the differences between the two financial statement versions. In the balance sheet the differences are concentrated in assets only one liability is different. In total, assets are 1.55 million lower and liabilities are 65,000 higher. These differences are the results of recording slightly lower amounts of sales revenue and significantly higher amounts of expenses in the conservative Version C scenario.

Considering Consolidated Financial Statements

Understanding consolidation Seeing how companies buy companies Exploring consolidated financial statements Turning to the notes for details ike couples who marry and work to combine two incomes, two sets of financial obligations, and two ways of managing money, things get complicated when companies decide to join forces or buy other companies and their financial statements become one. This new arrangement can make it much harder for you to find out how each of the pieces of this new entity performs financially. In this chapter, I discuss how to read the more complex financial reports that arise when companies consolidate.

Reading Consolidated Financial Statements

Most major corporations are made up of numerous companies bought along the way to create their empires. The financial statement for such a corporation reflects the financial results for all these entities it bought, as well as the original assets of the company. After a stock acquisition by the parent company, the subsidiary continues to maintain separate accounting records. But in reality, the parent company controls the subsidiary, so it no longer operates completely independently. By accounting rules, the parent company must present its subsidiary's and its own financial operations in a consolidated manner (even though the two companies may be separate legal entities). The parent company does so by publishing consolidated financial statements, which combine the assets, liabilities, revenue, and expenses of the parent company with those of its affiliates (that is, its subsidiaries, associates, and joint ventures). (ftNG If you hold a minority interest (see the previous section for...

InVesting in small business and your career

With what type of investment have people built the greatest wealth If you said the stock market or real estate, you're wrong. The answer is small business. You can invest in small business by starting one yourself (and thus finding yourself the best boss you've probably ever had), buying an existing business, or investing in someone else's small business. Even if small business doesn't interest you, your own job should, so I present some tips on making the most of your career.

Interpreting Financial Statements Fixed Assets

7-47 Refer to Reebok's financial statements in Appendix E. Review the balance sheet a. Read Notes 1 and 4. Identify and discuss any unusual terms. Trace any numerical disclosures of fixed asset costs in the notes to corresponding disclosures in the financial statements. c. Identify Reebok's accumulated depreciation balances at the end of each year. If these items are not disclosed, what effects will this have on your analysis of the financial statements

Getting Started Pro Forma Financial Statements

Pro forma financial statements are a convenient and easily understood means of summarizing much of the relevant information for a project. To prepare these statements, we will need estimates of quantities such as unit sales, the selling price per unit, the variable cost per unit, and total fixed costs. We will also need to know the total investment required, including any investment in net working capital. pro forma financial statements Financial statements projecting future years' operations.

Liabilities Interpreting Financial Statements

8-56 Tyler Corporation is a diversified company that provides goods and services through three major operating subsidiaries (1) a retailer of auto parts and supplies (2) a marketer of products for fund-raising programs in schools and (3) a manufacturer of cast iron pipe and fittings for waterworks applications. Its 1994 financial statements include the following current liabilities on the next page.

Financial Statements and Reports

Of the various reports corporations issue to their stockholders, the annual report is probably the most important. Two types of information are given in this report. First, there is a verbal section, often presented as a letter from the chairman, that describes the firm's operating results during the past year and discusses new developments that will affect future operations. Second, the annual report presents four basic financial statements the balance sheet, the income statement, the statement of retained earnings, and the statement of cash flows. Taken together, these statements give an accounting picture of the firm's operations and financial position. Detailed data are provided for the two or three most recent years, along with historical summaries of key operating statistics for the past five or ten years.1 The quantitative and verbal materials are equally important. The financial statements report what has actually happened to assets, earnings, and dividends over the past few...

Analysis of Financial Statements

Wall Street's response to Dell's announced earnings brings home several important points. First, investors and others outside the company use reported earnings and other financial statement data to determine a company's value. Second, analysts are primarily concerned about future performance past performance is useful only to the extent that it provides information about the company's future. Finally, analysts go beyond reported profits they dig into the financial statements. So, while many people regard financial statements as just accounting, they are really much more. As you will see in this chapter, the statements provide a wealth of information that is used by managers, investors, lenders, customers, suppliers, and regulators. An analysis of its statements can highlight a company's strengths and shortcomings, and this information can be used by management to improve performance and by others to predict future results. Financial analysis can be used to predict how such strategic...

Remeasured Financial Statements Foreign Currency to Functional Currency

The previous illustrations of the translation process assumed that the currency of the foreign entity was the functional currency. However, there are certain instances when the functional currency is not the currency of the foreign entity. In these instances, the financial statements of the foreign entity must be remeasured into the functional currency before the financial statements can be translated. The remeasurement process is intended to produce financial statements that are the same as if the entity's transactions had been originally recorded in the functional currency. Generally speaking, the remeasurement process is based on the temporal method. The temporal method was originally adopted by FASB Statement No. 8, which has been superseded by Statement No. 52. In essence, the historical exchange rates between the functional currency and the foreign currency are used to remeasure certain accounts. The adjustment resulting from the remeasurement process is referred to as a...

Financial Statement Effects of Inventory Costing Methods First Year of Operations

6-42 Tom Hanky, a financial analyst specializing in the toy industry, has provided the following comments concerning the 1999 financial statements of Toys-U-Must Toys-U-Must began operations in 1999 and uses the LIFO method in costing its inventories. Because the typical firm in the industry uses FIFO costing, it is desirable to adjust the company's financial statements as ifFIFO costing had been used. Footnotes to the financial statements reveal that the use of FIFO would increase the company's inventory valuation by 150 million, and that the company's income is taxed at 40 . Based on Hanky's comments, explain how each of the following items would be adjusted in Toys-U-Must's 1999 financial statements g. At the end of 2000,Toys-U-Must's financial statement footnotes reveal that the use of FIFO costing would increase the company's ending inventory valuation by 200 million (the effects on the beginning inventory were described above). Explain how each of the following items would be...

Interpreting Financial Statements Long Term Liabilities

9-51 Hansel, Inc., is an international company specializing in debt collection with a range of complementary credit management services. It is headquartered in Amsterdam and aims to maintain and enhance its position as Europe's leading force in debt collection. Its 1999 financial statements list bank loans of 17,000,000 ( pounds sterling) with the following related note

Budgeted Financial Statements

The final step in the budgeting process is the development of budgeted (pro forma) financial statements for the period. These financial statements reflect the results that will be achieved if the estimates and assumptions used for all previous budgets actually occur. Such statements allow management to determine whether the predicted results are acceptable. If they are not acceptable, management has the opportunity to change and adjust items before the period for which the budget is being prepared begins.

Financial Planning Focuses On The Big Picture

Strategic planning involves capital budgeting on a grand scale. In this process, financial planners try to look at the investment by each line of business and avoid getting bogged down in details. Of course, some individual projects are large enough to have significant individual impact. When Walt Disney announced its intention to build a new theme park in Hong Kong at a cost of 4 billion, you can bet that this project was explicitly analyzed as part of Disney's long-range financial plan. Normally, however, financial planners do not work on a project-by-project basis. Smaller projects are aggregated into a unit that is treated as a single project. Financial plans help managers ensure that their financing strategies are consistent with their capital budgets. They highlight the financing decisions necessary to support the firm's production and investment goals.

Financial Planning and Forecasting Financial Statements

Many managers compare financial planning with having a root canal time-consuming and painful. Even worse, they are left with nagging doubts that the results might not be very reliable. According to a recent survey of finance professionals, only 45 percent are satisfied with their current planning process, and 90 percent believe it is too cumbersome. Nevertheless, 71 percent of the finance professionals believe long-term strategic planning is the single most critical activity for future success. Given the importance of financial planning, it's not surprising that many companies are reengineering their processes, with plenty of help from consulting firms and software vendors. With information technology that standardizes data, links data throughout the company, and pulls it directly into the planning process, many companies are dramatically shortening the planning cycle. For example, Sprint replaced annual budgets with quarterly reviews, and Nationwide Financial Services reduced its...

Financial Plan 48 pages

If the preceding plan is your verbal description of the opportunity and how you will execute it, the financial plan is the mathematical equivalent. The growth in revenues speaks to the upside of your opportunity. The expenses illustrate what you need to execute on that opportunity. Cash flow statements serve as an early warning system to potential problems (or critical risks), and the balance sheet enables monitoring and adjusting the venture's progress. That being said, generating realistic financials is one of the most intimidating hurdles entrepreneurs face. I will highlight a dual strategy to building your model comparable analysis and the buildup technique. Entrepreneurs should do both approaches with work and skill the two approaches allow the entrepreneur to triangulate into a credible facsimile. Entrepreneurs are notoriously overoptimistic in their projections. One phrase that entrepreneurs overuse in their business plan, especially the financial plan, is conservative...

Framework for Financial Statement Analysis

Understand why financial statements are analyzed. 5. Identify limitations of financial statement analyses. Accountants produce financial information in the form of financial statements and many different excerpts from annual financial reports have been shown earlier in this book. In this chapter, we link many of the ratios and analytical concepts that have been previously introduced. The purpose of this chapter is to show how a comprehensive financial statement analysis can be conducted. To accomplish this purpose, we will use the entire set of financial statements from Wendy's International, Inc., which is one of the United States' largest restaurant chains, with more than 4,000 company- and franchise-operated restaurants. In order for financial information to be useful, it must be interpreted. A comprehensive set of ratios in an organized framework enhances the usefulness and inter-pretability of financial statements and eases the communication of financial information between firms...

Financial Statement Analysis Framework

In summary, our entire financial statement analysis framework is 2. Review the financial statements, notes, and audit opinions to identify any unusual events or characteristics. 5. Conduct horizontal and vertical analyses of each financial statement. Identify any unusual trends.

Financial Statement Analysis Wendys International

In this section, we apply our financial statement analysis framework to Wendy's International, Inc. We chose the Wendy's statements because they are representative of how most large companies present their financial data and because their statements include a variety of interesting but typical complications, where we can concentrate as much on the sources of information as on the numerical calculations. We have taken an investor focus to this analysis, concentrating on information that might be useful to someone contemplating purchasing shares of Wendy's common stock.

Shortterm Financial Plan

To illustrate a completed short-term financial plan, we will assume that Fun Toys arranges to borrow any needed funds on a short-term basis. The interest rate is a 20 percent APR, and it is calculated on a quarterly basis. From Chapter 5, we know that the rate is 20 4 5 per quarter. We will assume that Fun Toys starts the year with no short-term debt.

Applying the Financial Statement Analysis 10Step Framework

Review Reebok International's financial statements (see Appendix E) to determine whether any unusual or noteworthy events may limit the scope or comparability of financial statement analysis. Review Ernst & Young's audit report. Determine whether any restatements might be necessary and whether any barriers would restrict the comparability of Reebok's performance. In other words, conduct the first four steps in the financial statement analysis framework. b. Prepare horizontal and vertical analyses of Reebok's income statement for 1997 and 1996 (step 5 of our financial statement analysis framework). c. Conduct an analysis of Reebok's liquidity for 1997 and 1996 (step 6 of our financial statement analysis framework). d. Conduct an analysis of Reebok's profitability for 1997 and 1996 (step 7 of our financial statement analysis framework). e. Analyze Reebok's capital structure for 1997 and 1996 (step 8 of our financial statement analysis framework). f. Calculate Reebok's investor...

Reviewing the Results of Financial Statement Analysis Framework

11-37 This assignment is based on the computations and exhibits shown earlier that are based on Wendy's financial statements. In each case, refer to the relevant exhibits and review the results. a. Review the horizontal and vertical analyses of Wendy's income statement for 1997 and 1996 (step 5 of the financial statement analysis framework). b. Review the results of Wendy's liquidity analysis for 1997 and 1996 (step 6 of the financial statement analysis framework). c. Review the results of Wendy's profitability analysis for 1997 and 1996 (step 7 of the financial statement analysis framework. d. Review the results of Wendy's capital structure analysis for 1997 and 1996 (step 8 of the financial statement analysis framework). e. Review Wendy's investor ratios for 1997 and 1996 (step 9 of the financial statement analysis framework).

Financial Statement Analysis Comparison of Two Companies

11-38 Financial statements for two companies, The Gap and Intimate Brands, are presented below. Although the notes were omitted, a statement from each company's auditor is included. Both companies are in the retail apparel industry. We have audited the accompanying consolidated balance sheets of The Gap, Inc. and subsidiaries as of January 31, 1998 and February 1, 1997, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three fiscal years in the period ended January 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes...

Research Project Financial Statement Analysis and Interviewing Company Managers

11-45 Obtain financial statements from a local company. Conduct a comprehensive financial statement analysis of this company using the financial statement analysis framework. After completing your analysis, conduct an interview with a financial manager (such as a CFO) and a general manager (such as a CEO or operating vice president). Use your ratio results and initial conclusions as a basis for learning more about the company's performance. After your inter-view(s), write a report describing your conclusions regarding the company's performance. Indicate why you would or would not invest in this company.

Financial Statement Analysis Notes

11-49 Refer to the following excerpts from Fiddler Capital Management Incorpo-rated's 1999 financial statements. You have been provided with the independent auditor's report, financial statements, and Notes 1 and 2. We have audited the accompanying statement of financial condition of Fiddler Capital Management Inc. (the Company), wholly owned by HHS Companies, Inc., as of September 30, 1999. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles...

InternetComprehensive Financial Statement Analysis

11-54 Access the EDGAR archives (www.sec.gov edaux searches.htm) to locate the latest available 10-K filings for Kmart and Wal-Mart. Scroll down to the Summary of Key Financial Information and calculate the following ratios for the most recent two years. Hint Some data must be obtained from the consolidated financial statements

Business Financial Statements

The banker will conduct an investigation of the business you're looking to buy that's similar to the investigation you'll conduct. He or she will need to see the balance sheet and income statement of the business for at least three years and may well insist on interim financial statements, that is, financial statements updated from the date of the last fiscal year-end to the end of the most recent month or fiscal quarter. The quality of the financial statements is very important to bankers. They give far greater credence to financial statements prepared by outside accountants than to those prepared in-house. Financial statements prepared by certified public accountants carry more clout than those that aren't. If the financial statements look rather amateurish to you, they'll look worse to a banker. If they're bad enough, the banker may not bother to look further.

Life Cycle Financial Planning 161 Basics

Develop a financial plan for investment and consumption over your life-cycle (from the present until your death). Suppose the inflation rate is 2.0 and the real return on a riskfree money market fund is 3.5 . Suppose that a risky diversified fund offers an average real return of 8.0 and a standard deviation of 17.0 , which is equivalent to the post-World War II average real return and standard deviation on a well-diversified portfolio of US stocks. Suppose that federal income taxes have five brackets with the following rates 15.0 , 28.0 , 31.0 , 36.0 , and 39.6 . For current year, the upper cutoff on the first four brackets are 43,050, 104,050, 158,550, and 283,150 and these cutoffs are indexed to inflation. The state tax rate 3.0 , federal FICA-SSI tax rate on salary up to 72,600 is 6.2 , and the federal FICA-Medicare tax rate on any level of salary is 1.45 . Suppose you are currently 25 years old and you expect to earn a salary next year of 70,000. You currently have 0 in a...

Financial Statement Analysis and Proactive Tax Planning

As the lens on a business, financial statements, focused with the techniques of financial statement analysis, provide a way of interpreting the business in a way that enables readers to understand the value it generates for shareholders. Stephen Penman, Financial Statement Analysis and Security Valuation The mature firm's decision making involves an interplay between financial accounting information and taxes. This chapter analyses both internal and external accounting information for such decision making. The discussion of internal use focuses on segmental analysis. External use focuses on tax-related footnotes found in competitors' financial statements.

Analyzing Financial Statements with Ratios

Financial statements have lots of numbers in them. (Duh ) All these numbers can seem overwhelming when you're trying to see the big picture and make general conclusions about the financial performance and condition of the business. One very useful way to interpret financial reports is to compute ratios that is, to divide a particular number in the financial report by another. Financial statement ratios are also useful because they enable you to compare a business's current performance with its past performance or with another business's performance, regardless of whether sales revenue or net income was bigger or smaller for the other years or the other business. In other words, using ratios cancels out size differences. (I bet you knew that, didn't you ) Figures 13-1 and 13-2 present an income statement and balance sheet for a public business that will serve as the example for the rest of the chapter. I don't include a statement of cash flows here because no ratios are calculated from...

The Short Term Financial Plan

Financial Planning and 27. Short-Term Finance Corporate Finance, Sixth Short-Term Finance and Planning Part VII Financial Planning and Short-Term Finance Ross-Westerfield-Jaffe I VII. Financial Planning and I 27. Short-Term Finance I I The McGraw-Hill

The Financial Statements Of Lioi Steel Fabricators Are Shown Below

12-10 The financial statements of Lioi Steel Fabricators are shown below, with the actual results for CORpORATE VALUATION 2002 and the projections for 2003. Free cash flow is expected to grow at a 6 percent rate after 2003. The weighted average cost of capital is 11 percent.

Dividend Payouts Use The Annual Financial Statements For General Mills Gis Boston Beer Sam And Us Steel X To Find The

Dividend Payouts Use the annual financial statements for General Mills (GIS), Boston Beer (SAM), and US Steel (X) to find the dividend payout ratio for each company for the last three years. Why would these companies pay out a different percentage of income as dividends Is there anything unusual about the dividends paid by US Steel How is this possible VII. Short-Term Financial Planning and Management

Building on the Foundation of the External Financial Statements

Every business has some problems, perhaps even some serious ones. However, external financial statements are not designed to expose those problems. Except in extreme cases in which the business is obviously in dire financial straits you'd never learn about its problems just from reading its external financial statements. To borrow lyrics from an old Bing Crosby song, external financial statements are designed to accentuate the positive, eliminate the negative . . . and don't mess with Mister In-Between.

Financial Ratios And Consolidated Financial Statements

Ated companies affects selected financial statement ratios. As seen earlier, some financial statement elements change dramatically as a result of consolidating subsidiary firms, while other items are unaffected.To illustrate the effects of consolidation on selected financial ratios, Exhibit 13-3 repeats the financial statements of Pepper Company before and after consolidation, as developed earlier in the chapter. Exhibit 13-3 also shows the calculation of two widely used financial ratios.

Translation Of Foreign Currency Financial Statements

Foreign subsidiaries of U.S. firms usually prepare their financial statements in the currencies in which they transact their business, which is referred to as their functional currency. The U.S. parent firm prepares its financial reports in U.S. dollars and, as a consequence, the financial statements of the foreign subsidiaries must be translated into U.S. dollars in order to be consolidated with those of the parent company. To illustrate the process of translating foreign currency financial statements, consider the balance sheets and income statements of Perot, Inc., a subsidiary of a U.S. company, at the end of 2001, as shown in Exhibit 13-5. Perot, Inc., operates in Taiwan and prepares its financial statements in New Taiwan dollars, or NT . Because Perot, EXHIBIT 13-5 Translation of Foreign Currency Financial Statements Inc., is a subsidiary of a U.S. company, its financial statements must be translated into U.S. dollars prior to consolidation with those of the U.S. parent. Foreign...

Financial Statement Translation

Translation means that the foreign-currency balances in the financial statements of a foreign subsidiary are restated into U.S. dollars. There is no conversion of currencies, which means that one currency is exchanged for another. Translation is accomplished by simply multiplying the foreign-currency statement balances by an exchange rate. Translation would be a nonevent if every balance in the statements of the foreign subsidiary were multiplied by the

Reduce The Contents Of The Financial Statements

The typical financial statement package is too large. It includes lots of operational and financial information beyond the customary set of financial statements. While some of this information, such as subsidiary and departmental financials, can be readily printed from the accounting system with minimal delay, other reports require a great deal of extra preparatory work, and so lengthen the close. It is useful to see which pages of the financial statements are being read if they are of minimal use, then strip them out. This concept can extend to individual line items, such as operational measurements, that require a great deal of time to prepare. To determine the efficacy of this information, conduct a periodic survey of managers, asking them what information they use. Always conduct this survey in person, in order to extract the highest-quality responses. Some departments or divisions like to see their financial statements in a particular layout and may have prevailed upon the...

Further Reading The Millionaire Next Door

Here's a book that changed my thinking The Millionaire Next Door The Surprising Secrets of America's Wealthy,by Thomas J. Stanley (no relation to me) and William D. Danko. Their concept of PAWs (prodigious accumulators of wealth) versus UAWs (under-accumulators of wealth) opened my eyes to what wealth really is and how people acquire it.The descriptions of America's average millionaires (hint most of them wear denim and drive unremarkable cars) were a revelation to me and made me realize that wealth is attainable with the right mindset no matter whether you were born rich or brilliant. If you're interested in learning how regular folks quietly, legally, and ethically amass large fortunes, read this book.

Working with Financial Planners

Checking out your financial management options Determining whether you need help from a financial planner Understanding why it's hard to find good financial help Searching for a stellar financial planner Interviewing financial planners before you hire them M iring a competent and ethical financial planner or advisor to help you make and implement financial decisions can be money well spent. But if you pick a poor advisor or someone who really isn't a financial planner but a salesperson in disguise, your financial situation can get worse instead of better. So before I talk about the different types of help to hire, I discuss the options you have for directing the management of your personal finances.

What work and educational experience qualifies you to be a financial planner

Because investment decisions are a critical part of financial planning, take note of the fact that the most-common designations of educational training among professional money managers are MBA (master of business administration) and CFA (chartered financial analyst). And some tax advisors who work on an hourly basis have the PFS (personal financial specialist) credential.

Forecasting Financial Statements

Analysis of a company's current financial statements, as described in the Chapters 2 through 4, is enlightening, but not as enlightening as the analysis of its future financial statements. After all, it is future earnings and dividends that determine the value of a company's stock (see Chapter 14) and the relative likelihood of future timely payments of debt service that determines credit quality (see Chapter 13). To be sure, investors rely to some extent on the past as an indication of the future. Because already-reported financials are available to everyone, however, studying them is unlikely to provide any significant advantage over competing investors. To capture fundamental value that is not already reflected in securities prices, the analyst must act on the earnings and credit quality measures that will appear on future statements. Naturally, the analyst cannot know with certainty what a company's future financial statements will look like. Neither are financial projections mere...

Government Wide Financial Statements

The requirement for a government-wide set of financial statements prepared on an accrual basis has received much attention and resulted in a great deal of controversy. The required statements a statement of net assets and a statement of activities are shown in Illustrations 17-13 and 1714. These statements have one column for governmental activities and one column for proprietary (business-type) activities. In addition, there is a total for the government as a whole. Discretely presented component units are also presented in a separate column.

Sensitivity Analysis With Projected Financial Statements

Preparing a set of projected financial statements provides a glimpse at a company's future financial condition, given certain assumptions. The analyst can study the projected statements using the same techniques discussed EXHIBIT 12.10 Sensitivity Analysis Projected Financial Statements To complete the analysis, an investor or lender will also want to project financial statements on an optimistic, or best-case, scenario. Sample assumptions for a three-scenario sensitivity analysis might be

Sound Like a Pro in Talking about Your Financial Statements

On many occasions, a business manager has to discuss her financial statements with others. You should come across as very knowledgeable and be very persuasive in what you say. These occasions include Applying for a loan The loan officer may ask specific questions about your accounting methods and items in your financial statements. Putting a value on an ownership interest for divorce or estate tax purposes These values are based on the financial statements of the business (and other factors). Reporting financial statement data to national trade associations Presenting the annual financial report before the annual meeting of owners The shareowners may ask penetrating questions and expect you to be very familiar with the financial statements.

Financial Planning And Budgeting

As certainly as financial planning centers about commitments and utilization of capital, the protective function of management is also germane to the process. This function comprehends the integrity of capital, the profitable survival of the business entity, and the safe-guarding of the rights of the capital contributors, Paul M. Van Arsdell, Corporation Finance (New York The Ronald Press Company, 1968), p. 550. Financial planning allocates a firm's resources to achieve its investment objectives. Financial planning is important for several reasons. First, financial planning helps managers assess the impact of a particular strategy on their firm's financial position, its cash flows, its reported earnings, and its need for external financing. Second, by formulating financial plans, the firm's management is in a better position to react to any changes in market conditions, such as slower than expected sales, or unexpected problems, such as a reduction in the supply of raw materials. By...

Improving Your Financial IQ

Improving Your Financial IQ

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