(BQ) Part 2 book "Financial statement analysis" has contents: Analyzing operating activities, return on invested capital and profitability analysis, prospective analysis, credit analysis, equity analysis and valuation. | CHAPTER 6 SIX A N A LY Z I N G O P E R AT I N G ACTIVITIES A N A LY S I S O B J E C T I V E S A LOOK BACK The previous three chapters analyzed the accounting numbers describing financing and investing activities. We focused on their evaluation and interpretation. We also analyzed these activities for future operations. A LOOK AHEAD Chapter 7 extends our analysis to cash measures of operating and other business activities. We analyze the cash flow statement for interpreting these activities. We show how both accrual and cash measures of business activities enhance our analysis of financial statements. 338 Explain the concepts of income measurement and their implications for analysis of operating activities. Describe and analyze the impact of nonrecurring items, including extraordinary items, discontinued segments, accounting changes, write-offs, and restructuring charges. Analyze revenue and expense recognition and its risks for financial statement analysis. Analyze deferred charges, including expenditures for research, development, and exploration. Explain supplementary employee benefits and analyze the disclosures for employee stock options (ESOs). Describe and interpret interest costs and the accounting for income taxes. Analyze and interpret earnings per share data (Appendix 6A). Discuss economics of employee stock options (Appendix 6B). Analysis Feature Spin City of Earnings “When do exceptional charges become so routine that they’re not exceptional anymore? If the company is Eastman Kodak, apparently never. Kodak has taken one-time restructuring charges every year for the past 12, wiping out virtually half of its $ billion operating earnings since 1992” (BusinessWeek 2004). Of course, companies have routinely taken restructuring charges. But nervous investors fear that huge multiyear write-offs increasingly distort earnings—so much so, that some question whether the meaning of earnings numbers and their value as a measure of performance is .
