Financial Accounting for Executives & MBAs, 5e

by Simko, Wallace, Comprix

| ISBN: 978-1-61853-366-1 | Copyright 2021

Click here to preview

Instructor Requests

Digital Exam/Desk Copy Print Exam/Desk Copy Ancillaries
Tabs

Welcome to Financial Accounting for Executives & MBAs 5e!

If you have prior business experience, either working for a company or managing your own, then you know firsthand that an under- standing of financial accounting is essential to achieve your full potential. Although business decisions certainly involve a careful analysis of non-financial factors, they almost always require analysis of some aspect of financial accounting information. Initiating a marketing campaign, restructuring a subsidiary, determining the sale price of a new product, or assessing whether to acquire another company (and at what price) are just a few of the business decisions that require an understanding of financial accounting. This textbook is written to facilitate that understanding and to facilitate the readers personal goal of gaining a more complete understanding of financial accounting and its use in business decisions.

Target Audience

Financial Accounting for Executives & MBAs is written specifically for the Executive MBA and MBA markets. This concise text can be used in a wide variety of course formats, ranging from brief executive programs lasting only a few weekends to more traditional 15-week courses.

Book Organization

The text is designed with a flexible 12-chapter structure that fits all varieties of MBA programs: full-time, part-time, and executive. It provides students with the tools and insights necessary to make informed business decisions ranging from performance evaluation to firm valuation.

Chapters 1–4 introduce the basic structure of financial accounting.  This includes a focus on the role of accounting for the firm and the financial markets, preparing financial statements from business events, a detailed review of the primary financial statements, and financial analysis techniques and key ratios.

 Chapters 5–11 provide additional structure around these opening themes.  Each chapter includes a section that discusses how the chapters content should be analyzed and how that analysis will impact firm value.

  • Chapters 5–6 cover operating resources and decisions: Operating Cycle, Revenue Recognition and Receivable Valuation (Ch. 5) and Operating Expenses, Inventory Valuation, and Accounts Payable (Ch. 6).
  • Chapters 7–8 cover investing resources and decisions: Long-Lived Assets (Ch. 7) and Investing in Other Entities (Ch. 8).
  • Chapters 9–11 cover financing resources and decisions: Debt Financing (Ch. 9), Commitments and Contingent Liabilities, Deferred Tax Liabilities, and Retirement Obligations (Ch. 10), and Equity Financing and Shareholders’ Equity (Ch. 11).

Chapter 12 provides an introduction to methodologies to assess the value of a company.

The text then concludes with a variety of topics available as appendices and additional online re- sources. These include Time value of Money, Financial Statement Ratios, Accounting Mechanics, Working Capital Management, and Data Analysis.

Unique Approach to Illustrating Financial Accounting Concepts

The traditional and executive MBA markets tend to be analytical and decision-focused. Because of this, financial accounting needs be introduced in an accessible and highly relevant manner. Unlike many text- books in accounting that use the classic debit and credit paradigm to explain key concepts, this textbook explains the fundamentals of financial accounting using an approach that mirrors what is found in practice. It also is easily adaptable to spreadsheet applications. Not only is this approach more user-friendly (because most managers routinely use spreadsheets in their daily professional lives), but it is also far less labor- and time-intensive than the classic debit/credit paradigm.

The unique approach to recording transactions taken in this textbook emphasizes user analysis and deemphasizes bookkeeping. It builds upon the basic accounting equation to demonstrate how business events are processed and ultimately recorded. Both executive and MBA students praise the approach for its simplicity and intuitive appeal, as well as for its link back to how they observe accounting information in their professional lives. More specifically, it presents a vertical format to the balance sheet equation, functionally following the form and presentation of the balance sheet most often observed in practice and annual reports. The format is also used to illustrate income statement accounts as inputs directly into the retained earnings account, reinforcing this important concept to students in a way that helps them more clearly understand the relation between the balance sheet and income statement. Below is an example of the financial statement spreadsheet approach used in the context of a long-term fixed asset acquisition and sale:


Grounded in the Context of Corporate Decisions

Accounting information is an integral part of decision making at every level in business. Consequently, the books discussion of important accounting concepts is grounded in the context of actual corporate decisions. To this end, the book contains an abundance of excerpts and illustrations from actual corporate financial reports and disclosures that highlight the role and impact of accounting information, and financial statements specifically, in business decision making. Following is one example in the context of comprehensive income disclosures:


Reflects Contemporary Knowledge

In our experience, EMBAs and MBAs are frequently interested in exploring empirical questions such as: “How do the capital markets respond to accounting policy changes?” and “Which EPS measure—Basic EPS or Diluted EPS—is used by the capital market to value a companys stock?” Where appropriate, we have made reference to, and discussion of, the existing research in accounting and finance to address some of these empirically-based questions. By doing so, we enable the interested reader to further her/ his knowledge of these questions.


Important Pedagogical Elements

The book applies several pedagogical elements to help readers further understand the ramifications of accounting for business.

Global Perspective boxed inserts emphasize the similarity of U.S. GAAP and IFRS, but they also identify key differences. Exposure to similarities and differences is important as the pressure mounts to harmonize accounting standards globally.


Ethics Perspective boxed inserts emphasize ethical decision making, as well as the importance of ethics in accounting. In todays environment post-implementation of Sarbanes-Oxley, this information is pertinent to business students and accounting students alike.


Business Perspective boxed inserts illustrate key chapter topics using real-world examples and financial statements.


Tax Perspective boxed inserts highlight select aspects of U.S. tax law and how they differ from generally accepted accounting principles. Executives and MBAs very often are interested in understanding how their decisions affect both financial accounting earnings and the cash flows related to the tax treatment of those same decisions. While this text is clearly focused on the former, high-level overviews of some key tax reporting differences are offered throughout the text. Below is an example related to net operating losses:


In Practice boxed inserts help bridge the gap between the classroom and what students encounter in the real world. “In Practice” illustrations document situations a reader is likely to encounter and present the choices that companies make in reporting financial results.


Flexibility for Courses of Varying Lengths



New to the 5th Edition

This edition of Financial Accounting for Executives & MBAs includes a number of important new features. These include:

  • Updated for New Revenue Recognition Standard: Coverage in Chapter 5 and throughout the text is revised to reflect the new standard. 
  • Updated for Lower-of-Cost-or-Net Realizable Value: The new Inventory Standard on lower-of- cost-or-net realizable value is reflected in Chapter 6.
  • Updated for New Investment Standard: Chapter 8 reflects the new investment standard, with a revised discussion on managerial discretion and choice of accounting methods for debt security investments.
  • Updated for New Lease Standard: Chapter 9 covers the new lease standard including accounting disclosure and presentation, as well as a section contrasting the new lease accounting guidelines with the old.
  • Tax Cuts and Jobs Act: In addition to the new FASB standards, the Tax Cuts and Jobs Act of 2017 is reflected in Chapter 10 of the 5th edition.
  • Additional global updates: In addition to the chapter-specific changes, there have been several changes that span the book. Some of these include:
    • Updated numbers for examples, illustrations, and assignments that use real data.
    • Updated footnotes and other nonfinancial disclosures.
    • Numerous assignments in each chapter have been revised or replaced with new assignments.
    • Added review problems throughout the chapters so students can practice new content as it is introduced.
  • Enhanced for learning with myBusinessCourse (MBC)
    • Our Table of Contents is set up to facilitate eLearning, where each chapters Learning Take-aways are matched with eLecture Videos, Chapter Reviews, and Guided Example Videos all prepared by the authors.
    • The number of auto-graded assignments and videos in myBusinessCourse have been increased and expanded in this edition making MBC an ideal complement to hybrid and online courses. MBC is also a robust resource for students in traditional face-to-face courses.
  • Data Analytics: In addition to an introduction of data analytics in Chapter 1, the authors have created an online appendix with accounting specific examples including the use of data analytics for A/R aging and the detection of fraud with Benfords Law. The appendix includes:
    • World Bank GDP data and actual court data from the 1993 case State of Arizona v. Wayne James Nelson.
    • Video demonstrations of data analytics performed in both Excel and Tableau.
    • Numerous assignments giving students opportunities to perform data analytics in Excel and Tableau.
  • myBusinessCourse is a complete learning and assessment program that accompanies the textbook and contributes to student success in this course. With the fifth edition, MBC has been enhanced to include new questions and improvements to existing questions and functionality.


Companion Casebook for Case-Based Instruction 

Cases in Financial Reporting, 8th edition by Michael Drake (Brigham Young University), Ellen Engel (University of Chicago), D. Eric Hirst (University of Texas–Austin), and Mary Lea McAnally (Texas A&M University). This book comprises 27 cases and is a perfect companion book for faculty interested in exposing students to a wide range of real financial statements. The cases are current and cover companies from Canada, France, Austria, the Netherlands, the UK, India, as well as from the U.S. Many of the U.S. companies are major multinationals. Each case deals with a specific financial accounting topic within the context of one (or more) companys financial statements. Each case contains financial statement information and a set of directed questions pertaining to one or two specific financial accounting issues. This is a separate, saleable casebook (ISBN 978-1-61853-122-3). Contact your sales representative to receive a desk copy or email  customerservice@cambridgepub.com.



Introducing myBusinessCourse

myBusinessCourse is a complete, secure, web-based training and e-Learning solution. There is nothing to download or install; it is accessible through any modern web browser and most mobile devices.

Request a One-on-One Demo


eLecture Videos

eLecture Videos

  • Created by the authors of the textbook
  • Consistent with the textbook's explanations and approach
  • Cover learning objectives and concepts from each chapter
  • Ideal for remediation
  • Ideal for online and hybrid classrooms

Narrated demonstration videos

Guided Example Videos

  • Created by the authors of the textbook
  • Provide problem solving strategies as well as solutions
  • Offer clear, step-by-step demonstrations of how to solve select problems from the textbook

Auto-graded assignments

Auto-graded Assignments

  • Provides immediate feedback
  • Create assignments using problems from the textbook
  • Additional randomized versions of assignments provide extra practice
  • Ideal for remediation
  • Include select questions from test banks

Detailed Reporting Tools

Detailed Reporting Tools

  • Quickly review the performance of individual students
  • Quickly review the performance of entire class
  • Use reports on student performance to customize your lectures to fit student needs

Enhanced eBook

  • Save money
  • Includes myBusinessCourse
  • Integrates eLecture and demonstration videos
  • Bookmarking
  • Note taking
  • Highlighting

Third Party Integrations

Third Party Integrations

  • Single sign-on
  • Link to assignments in myBusinessCourse from your third party course
  • Automatically sync gradebooks each night

Flashcards

  • Study, learn and master key terms.
  • With linear-mode, get full control over the deck. Go back and forth between cards, shuffle and auto-play the deck.
  • With certainty-mode, test how well you know each term. If you are not certain you have learned the term, it will display again later in the deck.

Support and Training

Support and Training

  • Technical support for students and faculty available daily
  • Faculty training conducted daily
Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. iv)
Brief Contents (pg. xiii)
Table of Contents (pg. xiv)
Chapter 1 The Economic Environment of Accounting Information (pg. 2)
Financial Accounting and Its Relevance (pg. 4)
Why Accounting Information Is Important (pg. 5)
Financial Accounting: What Is It? (pg. 6)
Review Problem 1.1 (pg. 7)
Financial Statements (pg. 7)
Review Problem 1.2 (pg. 13)
Qualitative Attributes of Accounting Information (pg. 13)
Amazon’s Accounting Methods and the Role of the Independent Auditor (pg. 14)
Generally Accepted Accounting Principles (pg. 16)
Role of Financial Accounting in Investment Decisions: An Overview (pg. 19)
Review Problem 1.3 (pg. 21)
Changing Economic Landscape (pg. 21)
Data Analytics and Technological Enhancements (pg. 22)
Seven Accounting Myths (pg. 23)
Review Problem 1.4 (pg. 24)
Executive Summary (pg. 24)
Key Concepts and Terms (pg. 25)
Appendix 1A: Agency Costs and the Separation of Management and Capital Providers (pg. 25)
Conflicts Between Managers and Shareholders (pg. 26)
Conflicts Between Debtholders and Shareholders (pg. 27)
Appendix 1B: Generally Accepted Accounting Principles: Purpose, Concepts, and Elements (pg. 27)
Questions (pg. 28)
Exercises (pg. 31)
Problems (pg. 32)
Corporate Analysis (pg. 36)
Solutions to Review Problems (pg. 37)
Chapter 2 From Business Events to Financial Statements (pg. 38)
Balance Sheet Equation (pg. 40)
Defining Some Accounting Terms (pg. 43)
Review Problem 2.1 (pg. 43)
Preparing Financial Statements from Business Events (pg. 43)
Recording Transactions. (pg. 43)
The Russian River Valley Winery (pg. 45)
Projected Business Events (pg. 47)
Review Problem 2.2 (pg. 57)
Preparing the Financial Statements (pg. 57)
Articulation of the Financial Statements (pg. 61)
Accounting Policy Decisions at Russian River Valley Winery (pg. 62)
Review Problem 2.3 (pg. 63)
Evaluating Business Performance and Making Financial Decisions (pg. 63)
Evaluating Firm Profitability (pg. 64)
Return on Equity Analysis (pg. 65)
Evaluating Financial Risk (pg. 67)
Review Problem 2.4 (pg. 67)
Managerial Discretion and Accounting Methods (pg. 68)
Operating Revenues at B.J.’s Wholesale Club (pg. 68)
Operating Expenses at Salesforce.com (pg. 69)
Executive Summary (pg. 70)
Key Concepts and Terms (pg. 71)
Questions (pg. 71)
Exercises (pg. 72)
Problems (pg. 74)
Corporate Analysis (pg. 80)
Solutions to Review ProblemS (pg. 81)
Chapter 3 Measuring Performance: Cash Flow and Net Income (pg. 84)
Analyzing and Computing Cash Flow Information (pg. 86)
Statement of Cash Flow (pg. 86)
Presenting Cash Flow Information (pg. 87)
Review Problem 3.1 (pg. 89)
Computing Cash Flow Under the Indirect Method (pg. 89)
The following balance sheet and income statement data were tak (pg. 96)
Analysis of the Statement of Cash Flow (pg. 96)
Cash Flow Ratios (pg. 99)
Review Problem 3.3 (pg. 100)
Alternative Measures of Cash Flow (pg. 100)
Review Problem 3.4 (pg. 102)
Identifying and Understanding Sustainable Earnings (pg. 103)
Special Items and Extraordinary Items (pg. 104)
Discontinued Operations (pg. 106)
Earnings per Share (pg. 106)
Review Problem 3.5 (pg. 108)
Pro Forma Earnings (pg. 108)
Executive Summary (pg. 110)
Key Concepts and Terms (pg. 111)
Appendix 3A: Converting Indirect Method Cash Flows to Direct Method Cash Flows (pg. 111)
Review Problem 3.6 (pg. 113)
Questions (pg. 113)
Exercises (pg. 115)
Problems (pg. 118)
Corporate Analysis (pg. 124)
Case (pg. 125)
Solutions to Review Problems (pg. 127)
Chapter 4 Using Financial Statements for Investing and Credit Decisions (pg. 130)
Analyzing Financial Performance (pg. 132)
Fundamentals of Financial Statement Analysis (pg. 132)
Percentage Change and Common-Size Financial Statements (pg. 136)
Review Problem 4.1 (pg. 138)
Financial Ratios (pg. 139)
Review Problem 4.2 (pg. 143)
Credit Risk Analysis (pg. 144)
Benchmarking: Comparisons with Similar Companies (pg. 144)
ROE Model Framework (pg. 146)
Estimating Sustainable Growth (pg. 147)
Review Problem 4.3 (pg. 148)
Limitations of Financial Statement Analysis (pg. 149)
Executive Summary (pg. 150)
Key Concepts and Terms (pg. 150)
Appendix 4A: Unlevering Financial Ratios (pg. 151)
Review Problem 4.4 (pg. 152)
Appendix 4B: Pro Forma Financial Statements (pg. 152)
Appendix 4C: Calculating the Cost of Equity Financing (pg. 153)
Review Problem 4.5 (pg. 154)
Questions (pg. 155)
Exercises (pg. 156)
Problems (pg. 160)
Corporate Analysis (pg. 167)
Case (pg. 168)
Solutions to Review Problems (pg. 175)
Chapter 5 Operating Cycle, Revenue Recognition, and Receivable Valuation (pg. 178)
Operating Cycle of a Business (pg. 180)
Fundamentals of Revenue Recognition (pg. 181)
Revenue Recognition Guidance: ASC 606 (pg. 182)
Revenue Recognition by Retail and Service Companies (pg. 184)
Review Problem 5.1 (pg. 185)
Revenue Recognition by Manufacturing Companies (pg. 185)
Review Problem 5.2 (pg. 190)
Valuing and Reporting Accounts Receivable (pg. 190)
Percentage-of-Credit-Sales Method (pg. 191)
Aging Method (pg. 193)
Review Problem 5.3 (pg. 197)
Managing a Company’s Investment in Receivables (pg. 198)
Sales Discounts (pg. 198)
Sales Returns (pg. 200)
Review Problem 5.4 (pg. 200)
Monetizing Accounts Receivable to Manage Operating Cash Flow (pg. 200)
Factoring (pg. 200)
Pledging (pg. 201)
Securitization (pg. 201)
Review Problem 5.5 (pg. 202)
Analyzing Operating Revenue and Receivables (pg. 202)
Revenue Recognition Policy (pg. 202)
Receivable Valuation Policy (pg. 203)
Review Problem 5.6 (pg. 204)
Executive Summary (pg. 205)
Key Concepts and Terms (pg. 205)
Appendix 5A: Revenue Recognition under ASC 606: Further Discussion (pg. 206)
A Five-Step Process (pg. 206)
Review Problem 5.7 (pg. 207)
Questions (pg. 208)
Exercises (pg. 209)
Problems (pg. 211)
Corporate Analysis (pg. 214)
Case (pg. 216)
Solutions to Review Problems (pg. 218)
Chapter 6 Operating Expenses, Inventory Valuation, and Accounts Payable (pg. 222)
Operating Cycle of a manufacturer (pg. 224)
Measuring Cost of Goods Sold and Ending Inventory (pg. 225)
Case Illustration: How Much is Earnings? (pg. 226)
Inventory Management Systems (pg. 227)
The Inventory Count (pg. 228)
Review Problem 6.1 (pg. 229)
Valuing Inventory Using FIFO, LIFO, and Weighted-average-A Closer Look (pg. 230)
Choosing an Inventory Method (pg. 233)
Review Problem 6.2 (pg. 234)
Lower of Cost or Net Realizable Value (pg. 235)
Review Problem 6.3 (pg. 236)
Inventory Accounting Under International Financial Reporting Standards (pg. 236)
LIFO Layers and the LIFO Inventory Reserve (pg. 237)
Liquidating LIFO Layers (pg. 240)
Review Problem 6.4 (pg. 241)
Managing a Company’s Investment in Inventories (pg. 242)
Accounts Payable and a company’s Operating Cycle (pg. 242)
Review Problem 6.5 (pg. 243)
Analyzing Inventory and Cost of Goods Sold (pg. 245)
Executive Summary (pg. 246)
Key Concepts and Terms (pg. 247)
Questions (pg. 247)
Exercises (pg. 248)
Problems (pg. 251)
Corporate Analysis (pg. 256)
Case (pg. 257)
Solutions to Review Problems (pg. 260)
Chapter 7 Long-Lived Fixed Assets, Intangible Assets, and Natural Resources (pg. 264)
Acquisition Cost of a Long-Lived Asset (pg. 266)
Betterment Versus Maintenance Expenditures (pg. 267)
Review Problem 7.1 (pg. 268)
Matching: The Allocation of costs to future periods (pg. 268)
Straight-Line Method (pg. 269)
Accelerated Methods (pg. 270)
Units-of-Production Method (pg. 272)
Choosing a Depreciation Method (pg. 273)
Review Problem 7.2 (pg. 275)
Accounting Policy Changes (pg. 275)
Revaluing Long-Lived Assets (pg. 278)
Sale or Retirement of Long-Lived Assets (pg. 278)
Review Problem 7.3 (pg. 279)
Distortion Caused by Aging Assets (pg. 279)
Intangible Assets (pg. 280)
Research and Development Costs, Patents, and Copyrights (pg. 280)
Marketing Costs (pg. 282)
Review Problem 7.4 (pg. 282)
Natural Resources (pg. 283)
Review Problem 7.5 (pg. 284)
Long-Term Fixed Asset Accounting Under International Financial Reporting Standards (pg. 284)
Analyzing Capital Investments (pg. 285)
Review Problem 7.6 (pg. 286)
Executive Summary (pg. 287)
Key Concepts and Terms (pg. 287)
Questions (pg. 287)
Exercises (pg. 289)
Problems (pg. 290)
Corporate Analysis (pg. 294)
Case (pg. 295)
Solutions to Review Problems (pg. 298)
Chapter 8 Investing In Other Entities (pg. 300)
Investments in Other Entities (pg. 302)
Review Problem 8.1 (pg. 302)
Overview of Accounting for Debt and Equity Securities (pg. 302)
Review Problem 8.2 (pg. 305)
Accounting for Debt and Equity Securities-Passive investments (pg. 306)
Valuation Adjustments (pg. 307)
Recording the Sale of Investment Securities (pg. 308)
Review Problem 8.3 (pg. 309)
Managerial Discretion: The Choice of Accounting Methods for Debt Security Investments (pg. 309)
Equity Method and Consolidation Accounting (pg. 311)
Case 1. (pg. 312)
Case 2. (pg. 314)
Case 3. (pg. 317)
Review Problem 8.4 (pg. 319)
Deconsolidation (pg. 319)
Accounting for Joint Ventures (pg. 320)
Accounting for Special Purpose Entities (pg. 321)
Review Problem 8.5 (pg. 323)
Accounting for Investments in Foreign Entities (pg. 323)
Currency Exchange Rate Fluctuations (pg. 323)
Illustration of Foreign Currency Translation (pg. 324)
Review Problem 8.6 (pg. 326)
Analyzing Intercorporate Investments (pg. 326)
Executive Summary (pg. 327)
Key Concepts and Terms (pg. 328)
Questions (pg. 328)
Exercises (pg. 330)
Problems (pg. 332)
Corporate Analysis (pg. 338)
Solutions to Review Problems (pg. 341)
Chapter 9 Debt Financing: Bonds, Notes, and Leases (pg. 344)
Financing Operations and Assets with Debt: Bonds and Notes (pg. 346)
Credit Ratings and the Cost of Debt (pg. 347)
Review Problem 9.1 (pg. 348)
Valuing Bonds and Notes (pg. 349)
Interest Expense (pg. 351)
Market Rates of Interest and the Book Value of Debt (pg. 353)
Review Problem 9.2 (pg. 353)
Early Debt Retirement (pg. 353)
Zero-Coupon Bonds and Notes (pg. 355)
Review Problem 9.3 (pg. 357)
Lease Financing (pg. 357)
Accounting for Leases (pg. 358)
Lease Accounting, Disclosures and Presentation (pg. 363)
Contrasting the New Lease Accounting Guidelines with the Old (pg. 365)
Review Problem 9.4 (pg. 366)
Calculating the Weighted-average Cost of Debt (pg. 367)
Review Problem 9.5 (pg. 367)
Managing Reported Debt (pg. 368)
Analyzing a Company’s Use of Leverage (pg. 369)
Review Problem 9.6 (pg. 370)
Executive Summary (pg. 370)
Key Concepts and Terms (pg. 371)
Questions (pg. 371)
Exercises (pg. 373)
Problems (pg. 375)
Corporate Analysis (pg. 380)
Case (pg. 380)
Solutions to Review Problems (pg. 384)
Chapter 10 Commitments and Contingent Liabilities, Deferred Tax Liabilities, and Retirement Obligations (pg. 386)
Commitments and Contingent Liabilities (pg. 388)
Review Problem 10.1 (pg. 390)
Deferred Income Tax Liabilities (pg. 391)
Analyzing Deferred Income Taxes (pg. 395)
Review Problem 10.2 (pg. 398)
Employee Retirement Obligations (pg. 399)
Estimating Retirement Obligations and Their Cost (pg. 400)
Retirement Benefit Disclosures (pg. 400)
Managing Retirement Obligations (pg. 403)
Review Problem 10.3 (pg. 404)
Analyzing Other Potential Liabilities (pg. 404)
Review Problem 10.4 (pg. 405)
Executive Summary (pg. 405)
Key Concepts and Terms (pg. 405)
Appendix 10A: Financial Instruments and Derivatives (pg. 406)
Review Problem 10.5 (pg. 407)
Questions (pg. 407)
Exercises (pg. 409)
Problems (pg. 411)
Corporate Analysis (pg. 415)
Solutions to Review Problems (pg. 416)
Chapter 11 Equity Financing and Shareholders’ Equity (pg. 418)
Equity Financing (pg. 420)
Going Public (pg. 420)
Issuances and Repurchases of Equity (pg. 420)
Review Problem 11.1 (pg. 427)
Dividends (pg. 427)
Cash Dividends (pg. 427)
Free Share Distributions (pg. 430)
Stock Dividends (pg. 431)
Review Problem 11.2 (pg. 432)
Stock Splits (pg. 432)
Review Problem 11.3 (pg. 434)
Accumulated Other Comprehensive Income (pg. 434)
Employee Stock Options (pg. 437)
Review Problem 11.4 (pg. 441)
Analyzing Equity Financing and Shareholders’ Equity (pg. 442)
Review Problem 11.5 (pg. 443)
Executive Summary (pg. 443)
Key Concepts and Terms (pg. 444)
Questions (pg. 444)
Exercises (pg. 446)
Problems (pg. 449)
Corporate Analysis (pg. 454)
Case (pg. 455)
Solutions to Review Problems (pg. 458)
Chapter 12 Using Accounting Information in Equity Valuation (pg. 460)
Pro Forma Financial Statements (pg. 462)
Review Problem 12.1 (pg. 466)
Introduction to Equity Valuation (pg. 467)
Using Cash Flow Data to Value a Company (pg. 468)
Developing Cash Flow Data (pg. 468)
Valuation using the Discounted Cash Flow Model (pg. 471)
The Operating Value of a Firm (pg. 471)
Free Cash Flow (pg. 472)
Valuing a Firm’s Equity (pg. 474)
Valuing the Russian River Valley Winery Shares (pg. 475)
Review Problem 12.2 (pg. 477)
Valuation using the Residual Income Model (pg. 477)
Valuing the Russian River Valley Winery Shares (pg. 478)
Review Problem 12.3 (pg. 479)
Valuation using Price-Earnings Multiples (pg. 480)
Review Problem 12.4 (pg. 481)
Executive Summary (pg. 482)
Key Concepts and Terms (pg. 482)
Exercises (pg. 483)
Problems (pg. 486)
Corporate Analysis (pg. 502)
Solutions to Review Problems (pg. 506)
Appendix A The Time Value of Money (pg. 508)
Time Value Calculations Using Formulas (pg. 509)
Future Value of a Single Amount (pg. 509)
Future Value of an Annuity (pg. 509)
Present Value of a Single Amount (pg. 510)
Present Value of an Annuity (pg. 511)
Time Value Calculations using a Financial Calculator or an Electronic Spreadsheet (pg. 512)
Future Value of a Single Amount (pg. 512)
Future Value of an Annuity (pg. 514)
Present Value of a Single Amount (pg. 515)
Present Value of an Annuity (pg. 516)
Solving More Complex Time Value Problems (pg. 516)
Using Tables to Solve Time Value of Money Problems (pg. 519)
Exercises (pg. 522)
Appendix B Financial Statement Ratios and Metrics (pg. 524)
Asset Management and Efficiency (pg. 524)
Profitability Ratios (pg. 525)
Cash Flow Ratios (pg. 525)
Liquidity Ratios (pg. 525)
Solvency and Capital Structure Ratios (pg. 526)
Miscellaneous Other Ratios (pg. 526)
Appendix C IFRS Illustrated: LVMH Moët Hennessey-Louis Vuitton (pg. 528)
Appendix D Accounting Mechanics: T-Accounts and Journal Entries (pg. 534)
CHAPTER 2: Technical Language of Accounting-The Debit and Credit Paradigm (pg. 534)
The Accounting Cycle (pg. 535)
CHAPTER 5: Recording Operating Revenue and Receivables Using the Debit and Credit Paradigm (pg. 543)
Revenue Recognition Transactions: ProFlight Inc. (pg. 543)
Accounting for Receivables: Pan American Enterprises, Inc. (pg. 545)
CHAPTER 6: Recording Cost of Goods Sold and Inventory Using the Debit and Credit Paradigm (pg. 547)
Arizona Ice Cream Company, Inc.: Recording Inventory Transactions (pg. 547)
CHAPTER 7: Recording Investments in, and Sales of, Long-Lived Assets Using the Debit and Credit Par (pg. 548)
Illustrative Journal Entries (pg. 549)
CHAPTER 8: Recording Investments in Other Corporate Entities using the Debit and Credit Paradigm (pg. 549)
Accounting for Marketable Debt and Equity Securities: The New South Wales Trading Company Inc. (pg. 549)
Equity Method and Consolidated Accounting: Savanna, Inc. (pg. 550)
CHAPTER 9: Recording Debt Financing Transactions Using the Debit and Credit Paradigm (pg. 552)
Accounting for Notes (pg. 552)
Accounting for Leases (pg. 553)
CHAPTER 11: Recording Equity Financing Transactions Using the Debit and Credit Paradigm (pg. 554)
Appendix E Working Capital Management (pg. 556)
Growth and Working Capital: An Illustration of Risk (pg. 556)
Methods to Manage Working Capital Financing Needs (pg. 560)
Exercises (pg. 561)
Appendix F (pg. 562)
Data Analytics (pg. 563)
Data Analytics in the Accounting Profession (pg. 563)
Blockchain Technology (pg. 564)
Executive Summary (pg. 566)
Key Concepts and Terms (pg. 566)
Questions (pg. 566)
Exercises (pg. 567)
Problems (pg. 568)
Index (pg. 574)
Paul J. Simko

Paul J. Simko

Paul J. Simko is Associate Dean of the MBA for Executives Program and Associate Professor of Business at the University of Virginia's Darden School.

He received Bachelor of Science and Master in Accountancy degrees from the University of Florida, and a Ph.D. from the University of Texas at Austin. Professor Simko was previously on the faculty at Emory University, and has served as a Visiting Professor at Indiana, INSEAD, the Helsinki School of Economics, and the Indian School of Business. He was a Senior Analyst with Citicorp and is a Certified Public Accountant, and he remains a frequent consultant to government agencies and public and private corporations. Professor Simko has received numerous recognitions for his research and teaching. His research has appeared in such journals as The Accounting Review, Journal of Accounting Research, Financial Analysts Journal, and the Stanford Journal of Law, Business and Finance.


James S. Wallace

James S. Wallace

Associate Professor at The Peter F. Drucker and Masatoshi Ito Graduate School of Management at The Claremont Graduate University.

He received his Bachelors of Arts from the University of California, Santa Barbara, his MBA from the University of California, Davis, and his PhD from the University of Washington. Professor Wallace also holds a CPA certification from the state of California. He previously served on the faculty of the University of California, Irvine and has served as a visiting professor at the University of California, San Diego. Professor Wallace's work has appeared in leading academic journals including the Journal of Accounting and Economics, the Journal of Corporate Finance, and Information Systems Research, along with leading applied journals such as the Journal of Applied Corporate Finance, the Journal of Accountancy, Issues in Accounting Education and Accounting Horizons. Prior to his career in academics, Professor Wallace worked in public accounting and in industry with a Fortune 500 company. He has done consulting work with numerous companies in multiple industries.

Joseph Comprix

Joseph Comprix

Joseph Comprix is an Associate Professor of Accounting at Syracuse University. He has a B.S. from The Ohio State University and a Ph.D. from the University of Illinois at Urbana-Champaign.

Professor Comprix previously taught at Arizona State University and at the State University of New York at Buffalo before joining Syracuse University in 2008. He has served as the Chair of the Accounting Department at Syracuse University for the past seven years. He has been named the Outstanding Professor in the graduate program four times while at Syracuse, and in 2012, the University recognized him for excellence in graduate education. Prior to becoming an academic, Professor Comprix spent several years working as a staff accountant and accounting manager at Mead Corporation. Professor Comprixs research has been published in journals such as the Journal of Accounting and Economics, Contemporary Accounting Research, the Journal of the American Taxation Association, and Accounting Horizons.


Student
Errata
Last Updated: Jul 9 2020

Corrections to identified errors in the text

Check Figures
Last Updated: Jul 9 2020

Check Figures for noted end-of-chapter Exercises and Problems.

Practice Quizzes w/Solutions
Last Updated: Jul 9 2020

Brief practice quizzes containing multiple choice questions for each chapter. Includes solutions.

Instructors
You must have an instructor account and submit a request to access instructor materials for this book.
eBook
Go paperless today! Available online anytime, nothing to download or install.
6 months / $125.00
Course access code included
Printed Textbook
Are you looking to purchase a new book? Buy direct and save!
Soft Cover / $225.00
Course access code included
Course Access only

Do you have a Section ID from your instructor?

Enter the Course ID from your instructor. Have a used copy of the textbook? You can just buy course access.
Prices can vary
Click Enroll Now to proceed
Enroll Now