Title Details

MARTIN FRIDSON is Managing Director at Merrill Lynch & Company and a member of Institutional Investor's All-America Fixed Income Research Team. His other books include How to Be a Billionaire, It Was a Very Good Year, and Investment Illusions, all published by Wiley. He is a past governor of the Association for Investment Management and Research.
FERNANDO ALVAREZ is Clinical Associate Professor in the Berkley Center for Entrepreneurial Studies at the Stern School of Business at NYU. His current research focuses on the management of cash flows resulting from changes in working capital requirements, the structure of cash flows, and the sources and uses of capital for the entrepreneurial firm. His research has been funded by the MacArthur Foundation, the Kaufman Foundation, U.S. Trust of Boston, and Wells Fargo Bank.

PART I. READING BETWEEN THE LINES.

Chapter 1. The Adversial Nature of Financial Reporting.

PART II. THE BASIC FINANCIAL STATEMENTS.

Chapter 2. The Balance Sheet.

Chapter 3. The Income Statement.

Chapter 4. The Statement of Cash Flow.

PART III. A CLOSER LOOK AT PROFITS.

Chapter 5. What is Profit?

Chapter 6. Revenue Recognition.

Chapter 7. Expense Recognition.

Chapter 8. Applications and Limitations of EBITDA.

Chapter 9. The Reliability of Disclosures and Audits.

Chapter 10. Mergers-and-Acquisitions Accounting.

Chapter 11. Profits in Pensions.

PART IV. FORECASTS AND SECURITY ANALYSIS.

Chapter 12. Forecasting Financial Statements.

Chapter 13. Credit Analysis.

Chapter 14. Equity Analysis.

Bibliography.

Glossary.

Notes.

Index.

In Financial Statement Analysis: A Practitioner?s Guide, Third Edition (New York: John Wiley & Sons, Inc., 2002), Martin Fridson and Fernando Alvarez detail a number of gimmicks that companies have employed, including: Booking deliveries of computer software to resellers as sales, despite undisclosed agreements permitting the return of unsold merchandise for refunds.Helping managers to achieve their annual sales targets by announcing a price increase, effective January 2, to induce customers to order before year-end, even though the hike puts the company out of line with the competition.Taking credit for volume-based rebates from suppliers before purchases of merchandise reach the level needed to qualify for the rebates. Surprisingly, to many readers, the slipperiness depicted in Financial Statement Analysis is not limited to penny-stock companies or high-flying initial public offerings. A number of the book?s case studies involve widely respected Fortune 500 corporations. The authors quote an official of one such company who freely admits that when a division is in danger of missing its quarterly profit goal, management tries to make an acquisition in the waning days so that it can count the unit?s earnings for the entire period.

Fridson and Alvarez do not merely describe and deplore opaque financial reporting practices. They document a number of cases in which analysts successfully anticipated stock and bond price shocks, using financial ratios and publicly available information from outside the statements. The authors also provide practical advice on making financial projections. (Extra Credit, The Journal of Global High Yield Bond Research)

Financial Statement Analysis, by junk bond guru Martin Fridson, is my No. 1 pick for those at an intermediate level. Fridson does a great job of explaining the various forces at work in corporate financial statement preparation, and also has valuable insights into issues such as pro form a income statements and revenue recognition practices. - Street.com