(BQ) Part 2 book has contents: Financial statement analysis - assets; financial statement analysis - liabilities, corporate finance; equity investments - securities markets; equity investments - industry and company analysis; fixed income investments - basic concepts,.and other contents. | Study Session 9 337 STUDY SESSION 9 Financial Statement Analysis: Assets Overview This Study Session looks at some important issues concerning the reporting of assets in financial statements and how different accounting methods can be used. Often the choice of method makes a substantial difference to the reported financial position and profitability of the company. It can also impact on actual cash flows in the form of taxes paid. An analyst needs to consider the necessary adjustments to the reported figures to better understand the underlying position of the company. In the following Readings we look at two specific issues relating to assets on the balance sheet, these are accounting for inventory and long-lived assets. Reading Assignments The Analysis and Use of Financial Statements, 3rd edition, Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried (Wiley, 2003) 39. “Analysis of Inventories,” Ch. 6, pp. 192−215 and pp. 219-220 40. “Analysis of Long-Lived Assets: Part I − The Capitalization Decision,” Ch. 7, pp. 227−240, including Box 7-1 and pp. 242−244 41. “Analysis of Long-Lived Assets: Part II − Analysis of Depreciation and Impairment,” Ch. 8, pp. 257−278 and pp. 280−282 338 Reading: 39 Analysis of Inventories 39 Analysis of Inventories Learning Outcome Statements (LOS) 39-a Compute ending inventory balances and cost of goods sold using the LIFO, FIFO, and average cost methods to account for product inventory and explain the relationship among and the usefulness of inventory and cost-of-goods-sold data provided by the LIFO, FIFO, and average cost methods when prices are 1) stable or 2) changing. 39-b Adjust the financial statements of companies using different inventory accounting methods to compare and describe the effect of the different methods on cost of goods sold and inventory balances. Discuss how a company’s choice of inventory accounting method affects other financial items such as income, cash flow, and working capital, and compute and
