Understanding Financial Statements

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This book is about understanding the corporate annual report of companies. In the initial chapters, especially, chapters 3, 4, 5, and 6, I have learned how management tries to use profits made by their organization and other performance parameters to explicate the financials of the organization. The purpose of such attempts to manipulate such information and figures is to make business decisions (Fraser, and Ormiston 50-256).

This chapter provides insight into incomes statement and the stamen of stockholder equity. This chapter has provided an insightful lesson concerning solving unstructured problems. Two, how to use accounting information for decision-making is well outlined and exemplified to provide the learner with a comprehensive guideline about how to go about it. A comprehensive explanation about what a balance sheet is, what is a financial condition, asset, and receivable accounts using samples gives the learner a guideline that allows the development of proficiency in understanding a financial statement.

What are inventories, inventory accounting methods, and related contexts are exemplified, and processes are outlined to allow the learner to have an almost ‘hands on experience’ about them. A comprehensive study of liabilities, their types, how to calculate them is exemplified. I have studied what are current maturities and long-term debts, how they implicate the company and the context of accrued liabilities and deferred credits. In this chapter, the federal income taxes are discussed to provide us learners with a viewpoint point while comprehensively understanding what they refer to and represent in financial statements (Fraser, and Ormiston 50-78).

I have understood what are long-term debts, capital obligations (used in leasing arrangement in capital leasing), and Post-retirement benefits. I have been able to study commitments and contingencies in context. The chapter is packed with invaluable information about debts, profits, and financial statements. Stockholder equity is explained and I have a complete grasp of its value, the other balance sheet items are outlined and discussed.

Chapter 3 starts with insight about working on financial statements by borrowing from Consolidated Statements. The book offers insight about how to develop a consolidated financial statement through an example, hence I have learned more about the nature of operations and organization of the business. Revenue recognition, preparing inventories, and understanding the role, value, and core functions of financial statements are taught and I have understood these quite well. I have oriented myself with definite lived intangible assets, operating leases, commitments including advertising, purchase, and other commitments.

This chapter has provided me with a lot of insight into how to prepare a financial statement by drawing credible figures from operations and other relevant sources. The chapter, through the case, studies arms with me with analytical skills. I can read and understand a financial statement very easily and interpret data on each comprehensively. The chapter is however complex for there are so many sub-topics that I have not had quite a good grasp on.

Here, I have understood precisely what a ‘statement of cash flow.’ is it is worth noting that this chapter is dedicated to explaining the relationship, value, and importance of the statement of cash flow to the financial statement. I have been able to develop skills in developing the statement of cash flow; I have also understood its components and their definitions, value, and significance. These vital elements are cash that is available or floating in the business and the company operating activities. Secondly, the investing activities and financing activities of the organization are explained as central and part of the greater functions of the financial statement.

In this chapter, I have learned to calculate cash flow. I have learned to calculate using two methods. The first method is the direct and the second one the indirect method. I have learned how to realize cash flow from investing and financing activities. I have also learned quite efficiently, how to analyze the statement of cash flows and outflows.

The exact tabulation and calculations of more complex cash flows since the chapter provides various complex examples and I feel I need to go back into the book and study it comprehensively to understand these calculations well.

I have learned how to estimate and report organizations’ quality earnings. I have developed skills in analyzing how revenue should be calculated. I do have a comprehensive insight regarding premature revenue recognition, gross versus net basis, vendor financing, allowance for doubtful accounts, the price versus volume changes, and real versus nominal growth. This chapter is vast and quite ‘sub-tropical’ hence; a lot of theories concerning financial statements, sources of revenue, costs, and calculations are observed, learned, and exemplified through calculations. With an emphasis on the cash flows, their development, and their relationship with revenue earning, I have become more aware of the principal ethos of financial statements, profit source, balance sheets, and quality financial reporting practices.

Due to the theoretical aspect of the chapter, what I need is to revise the chapter more comprehensively so that I can be more proficient with the proponents of various contexts, especially in the developing of quality cash flows when methods of doing so are involved. Issues of commitment, venture capital financing, and commitments need to be learned comprehensively.

In this chapter, various financial statements analysis methods are extensively discussed exemplified. The chapter starts with advice regarding the objective of doing analysis. The objective of analysis differs significantly with each need. The book provides insight about creditor reason for doing analysis and vice-versa. How the company has performed from the core of the financial analysis.

I have learned about financial statements’ value, especially within the context of an organization’s status. I have learned that managers make financial statements, but managers do. An analyst’s role is to explicate and project the meanings of the statements.

Another vital lesson is that one understands the sources of information in the statements. The analysis aims at providing, to a considerable degree, the approach in the analysis and the exact sources of the information that forms the analysis. Here, the author takes us briefly to the context of chapter 1, ‘the proxy statement’ we are reminded of the value of this statement, especially in providing insight about useful information about an organizations directors, executive compensation, and the board of directors among other core functionalities (Fraser, and Ormiston 178-256).

Summarily, chapter six provides a list of handy tools of analysis and resourcing for financial statements. The audit report and how it is prepared is discussed extensively to provide enough guidelines on how to go about it. Management discussion is made primary, it has explained and well outlined so that one can have a viewpoint. Tools and techniques of making an analysis are done.

Though I have not completed this chapter, I have analyzed its contents, especially the appendix to get a clear picture of what I will learn in a later section of this chapter. Data analysis is vital when examining statements. Learning how to go about it will be very exciting and enriching. Am looking forward to learning how to conceptualize and think through intricate actual situations when soliciting solutions for problems using accounting principles. This ability will facilitate in making my decision-making capability to be effective. In this chapter, I will gain proficiency in thinking and using analysis tools and financial statements interpretations skills.

Works Cited

Fraser, Lyn. M, and Aileen Ormiston. Understanding Financial Statements. 9th. New Jersey: Pearsons Prentice Hall, 2003. 50-256. Print.

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Understanding Financial Statements

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