In our other accounting estimates articles, we talked about the discretion that management has in the income statement and the balance sheet. In this article, we will dive deeper into the incentives that management may have to manage these estimates. What is Earnings Management? Despite the discretionary nature of some of the
In our previous articles, we discussed the impact that accounting estimates have on the income statement. However, it is not just the income statement that is subject to estimates, the balance sheet is as well. Balance sheet items will affect efficiency ratios (asset turnover), solvency ratios (debt to equity), and
In the last article, we discussed revenue recognition, and its implication on financial statement analysis. We will follow up that discussion by going over the other half of the income statement: expenses. We will go over what the accounting standards are and what discretion management has, and how they could
We discussed financial statements and the importance of financial statement analysis in our previous articles. We will follow those discussions with a more detailed look at each statement. Public financial statements are governed by accounting standards, usually under IFRS or US GAAP, and audited by an external firm for fairness.
In the last article, we discussed the importance of understanding the three financial statements. In this article, we will make use of the numbers from the financial statements to analyze the underlying company. Vertical and Horizontal Analysis One important aspect of financial statements is that it allows analysts and management to compare
A robust understanding the three financial statements is important for banking and asset management interviews. This post is meant to be a quick review for an interview, or a complement to your introduction to financial accounting course, which covers this material in much greater detail. The three financial statements that all