Analysis of Financial Statements

This is a great book for those with limited accounting and finance background that would like an introduction to financial statement analysis. It covers a wide variety of topics in accounting and finance and is a good reference book. It is by no means very comprehensive if you are already a well-studied professional/academic in these fields.

I plan to take the first exam of the CFA in December of 2009. This book is part of a series of courses designed to prepare students for these exams. And the book, so far, is excellent. It's very current, up to date, and insightful.

[A review of the 2nd edition, 2006.] What clearly separates this second edition from the first is the analysis of certain prominent companies, since 1999. Notably Enron. In a chapter entitled "The Lessons We Learn", Enron occupies a major place. The authors describe how its financial reports were amazingly falsified, for several years. Yet Enron kept getting plaudits from analysts, and insufficient scrutiny, including from regulators. This is the last chapter in the book, and way too short. Maybe the authors should also have included studies of other huge blowups, like Adelphia and WorldCom. A lengthier discourse about how to try to detect warning signs in reportings might be more useful to readers.

How to identify the root problem. What we do to identify, to demonstrate the root problem. What tools we can use to analyse the problem. Conclusion: possible solutions.