The Analysis and Use of Financial Statements

This book and its accompanying CD is a valuable resource for those seeking a fundamental understanding of financial statements, their usage and signifcance. The chapters are well organized and walks the reader through various aspects of financial analysis. This book lays the foundations of fundamental analysis. On the filp side, the language could be a little difficult to interpret at times (more Harvardish or Yaleish than common English)and can be a little uninspiring. The authors assume that readers have a basic understanding of accounting which can throw off some readers. But I guess if someone is seeking to get their feet wet in financial analysis, it is safe to presume that he or she will atleast have the basic knowledge in accounting. Overall, this is a very good and useful book with neumerous real world examples of financial analysis at play. As I have mentioned before, this book lays down the foundation for fundamental analysis. I would recommend this book to all those who are currently persuing a career within the finaicial industry or corporate finance as analyst or aspire to become one - This book is a must read for you.

After reading the reviews on this book, I feel that I must comment on the book's high quality.In order to fully appreciate this book, an understanding must exist as to where the material fits in the financial analysis process. Clearly this book is not meant to explicitly teach readers how to build financial models; other books are available for that purpose. This book is designed to teach readers how to thoroughly read, understand, and more importantly, become an astute critic of the language of financial statements, GAAP.I disagree that technical accounting details are not very important in analysis engagements. Rather the opposite holds true in a majority of cases: One must thoroughly understand technical accounting and the implications that it has on economic reality in order to build quality financial models. Otherwise, "junk in/junk out" models will result. Given the highly publicized debacles that have recently occurred in the financial world, including Enron, the importance of distinguishing technical accounting from economic reality has become obvious. This book does effectively explain and build off the foundations of GAAP; however, this book is primarily focused on helping an analyst analyze and question the quality of financial statements versus how to simply prepare them. This is the big difference between this book and technical accounting textbooks.Of course, building financial models for decisions is the end objective of any analyst. However, this book is a must read in building quality financial models and projections. Again this book is not a financial modeling textbook, nor a technical accounting manual. Rather, it is a critical bridge between technical accounting material and decision modeling material. I recommend taking the time to read this excellent book and walk across the bridge before moving on to modeling.

In order to determine whether you should buy this book, you have to understand its purpose. It is not an Accounting textbook nor a preparation for the CPA exam. In other words, it is not directed at the preparers of financial statements but rather at the users.The authors do an excellent job of explaining accounting concepts in a clear and detailed manner. That explanation includes a comparison of different methods for accounting for the same transaction, a discussion of deficiencies/inconsistencies in accounting rules, etc. Building on all this, the authors then move on to explain how to analyze financial statements - to wring insights out of the accounting data beyond the "standard" analytical tools. This is the book's real value. This excellent book belongs in the reference library of anyone who needs to understand and analyze financial statements.One measure of its value is that AIMR uses it as one of the fundamental textbooks for its CFA program.

For CFA level 1 I used this book instead of the assigned FSA book. The reason is simple. It's very well written! Even if you are not confident in your accounting background knowledge, this is all you need for FSA.

The authors were very successful in providing a complete coverage of every single aspect on financial statements analysis. It's the kind of book to be used on a daily basis, either as a refresher on accounting concepts or as a reference when developing sound financial analyses.One suggestion: the authors should provide a solutions manual to accompany the book. It has many exercises and cases to be dealt with and therefore it would be interesting for the student to compare her own solution with that provided by the authors.