by Easton, Wild, Halsey, Lea McAnally
ISBN: 978-1-61853-100-1 | Copyright 2015Tabs
The combined skills and expertise of Easton, Wild, Halsey, and McAnally create the ideal team to author the first new financial accounting textbook for MBAs in more than a generation. Their collective experience in award-winning teaching, consulting, and research in the area of financial accounting and analysis provides a powerful foundation for this innovative textbook.
Welcome to the Sixth Edition of Financial Accounting for MBAs. Our main goal in writing this book was to satisfy the needs of today’s business manager by providing the most contemporary, relevant, engaging, and user-oriented textbook available. This book is the product of extensive market research including focus groups, market surveys, class tests, manuscript reviews, and interviews with faculty from across the country. We are grateful to students and faculty who used the First through Fifth editions and whose feedback greatly benefited this Sixth edition.
Financial Accounting for MBAs is intended for use in full-time, part-time, executive, and evening MBA programs that include a financial accounting course as part of the curriculum, and one in which managerial decision making and analysis are emphasized. This book easily accommodates mini-courses lasting several days as well as extended courses lasting a full semester.
Financial Accounting for MBAs is managerially oriented and focuses on the most salient aspects of accounting. It helps MBA students learn how to read, analyze, and interpret financial accounting data to make informed business decisions. This textbook makes financial accounting engaging, relevant, and contemporary. To that end, it consistently incorporates real company data, both in the body of each module and throughout assignment material.
The MBA curricula, instructor preferences, and course lengths vary across colleges. Accordingly and to the extent possible, the 12 modules that make up Financial Accounting for MBAs were designed independently of one another. This modular presentation enables each college and instructor to "customize" the book to best fit the needs of their students. Our introduction and discussion of financial statements constitute Modules 1, 2, and 3. Module 4 presents the analysis of financial statements with an emphasis on analysis of operating profitability. Modules 5 through 10 highlight major financial accounting topics including assets, liabilities, equity, and off-balance-sheet financing. Module 11 explains forecasting financial statements and Module 12 introduces simple valuation models. At the end of each module, we present an ongoing analysis project that can be used as a guide for an independent project. Like the rest of the book, the project is independent across the various modules. At the end of the book, we include several useful resources. Appendix A contains compound interest tables and formulas. Appendix B details the process for preparing and analyzing the statement of cash flow. Appendix C is an illustrative case that applies the techniques described in Modules 1 through 12 to an actual company, Kimberly-Clark. Appendix C can be used, in conjunction with the module-end project questions, by students required to prepare a company analysis. Appendix D is a chart of accounts used in the book.
Instructors differ in their coverage of accounting mechanics. Some focus on the effects of transactions on financial statements using the balance sheet equation format. Others include coverage of journal entries and T-accounts. We accommodate both teaching styles in this Sixth Edition. Specifically, Module 2 provides an expanded discussion of the effects of transactions using our innovative financial statement effects template. Emphasis is on the analysis of Apple's summary transactions, which concludes with the preparation of its financial statements. Module 3, which is entirely optional, allows an instructor to drill down and focus on accounting mechanics: journal entries and T-accounts. It illustrates accounting for numerous transactions, including those involving accounting adjustments. It concludes with the preparation of a trial balance and the financial statements. This detailed transaction analysis uses the same financial statement effects template, with journal entries and T-accounts highlighted in the margin. Thus, these two modules accommodate the spectrum of teaching styles—instructors can elect to use either or both modules to suit their preferences, and their students are not deprived of any information as a result of that selection.
Many instructors have approached us to ask about suggested class structures based on courses of varying length. To that end, we provide the following table of possible course designs:
|1||Week 1||Week 1||Week 1||Day 1|
|2||Week 2||Week 2||Week 2|
|4||Week 3 & 4||Week 3||Week 3||Day 2|
|5||Week 5||Week 4||Skim||Skim|
|6||Week 6||Week 5||Week 4||Day 3|
|7||Week 7||Week 6||Week 5||Day 4|
|8||Week 8||Week 7||Week 6||Day 5|
|10||Week 10 & 11||Week 8||Optional||Optional|
|11||Week 12 & 13||Week 9||Optional||Optional|
|12||Week 13 & 14||Week 10||Optional||Optional|
Tomorrow's MBA graduates must be skilled in using financial statements to make business decisions. These skills often require application of ratio analyses, benchmarking, forecasting, valuation, and other aspects of financial statement analysis for decision making. Further, tomorrow's MBA graduates must have the skills to go beyond basic financial statements and to interpret and apply nonfinancial statement disclosures, such as footnotes and supplementary reports. This book, therefore, emphasizes real company data, including detailed footnote and other management disclosures, and shows how to use this information to make managerial inferences and decisions. This approach makes financial accounting interesting and relevant for all MBA students.
As MBA instructors, we recognize that the core MBA financial accounting course is not directed toward accounting majors. Financial Accounting for MBAs embraces this reality. This book highlights financial reporting, analysis, interpretation, and decision making. We incorporate the following financial statement effects template to train MBA students in understanding the economic ramifications of transactions and their impact on all key financial statements. This analytical tool is a great resource for MBA students in learning accounting and applying it to their future courses and careers. Each transaction is identified in the "Transaction" column. Then, the dollar amounts (positive or negative) of the financial statement effects are recorded in the appropriate balance sheet or income statement columns. The template also reflects the statement of cash flow effects (via the cash column) and the statement of stockholders' equity effects (via the contributed capital and earned capital columns). The earned capital account is immediately updated to reflect any income or loss arising from each transaction (denoted by the arrow line from net income to earned capital). This template is instructive as it reveals the financial impacts of transactions, and it provides insights into the effects of accounting choices.
Financial Accounting for MBAs includes special features specifically designed for the MBA student.
Each module’s content is explained through the accounting and reporting activities of real companies. Each module incorporates a "focus company" for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage MBA students in real analysis and interpretation. Focus companies were selected based on the industries that MBA students typically enter upon graduation.
|Module 1||Berkshire Hathaway||Module 8||IBM|
|Module 2||Apple||Module 9|
|Module 3||Apple||Module 10||Southwest Airlines|
|Module 4||Walmart||Module 11||Procter & Gamble|
|Module 5||Pfizer||Module 12||Nike|
|Module 6||Cisco||Appendix B||Starbucks|
|Module 7||Verizon||Appendix C||Kimberly-Clark|
Market research and reviewer feedback tell us that one of instructors' greatest frustrations with other MBA textbooks is their lack of real company data. We have gone to great lengths to incorporate real company data throughout each module to reinforce important concepts and engage MBA students. We engage nonaccounting MBA students specializing in finance, taxation, marketing, management, real estate, operations, and so forth, with companies and scenarios that are relevant to them. For representative examples, SEE PAGES 2-34, 4-7, 5-8, 5-15, 6-10, 7-16, 8-5, 9-26, 10-20, and 11-9.
Analyzed on their own, financial statements reveal only part of a corporation’s economic story. Information essential for a complete analysis of a company’s financial position must be gleaned from the footnotes and other disclosures provided by the company. Consequently, we incorporate footnotes and other disclosures generously throughout the text and assignments. For representative examples, SEE PAGES 7-7, 7-9, 8-12, 8-27, and 10-6.
We repeatedly emphasize that financial analysis cannot be performed in a vacuum—appropriate benchmarks are critical to a complete understanding of a company’s financial performance and position. To this point, we provide graphics that capture industry-level data including many of the ratios we discuss and compute in the modules. For representative examples, SEE PAGES 4-15, 4-19, 6-12, and 7-25.
One primary goal of a MBA financial accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems and making informed business decisions. With that goal in mind, Managerial Decision boxes in each module encourage students to apply the material presented to solving actual business scenarios. For representative examples, SEE PAGES 2-35, 4-14, 7-23, 8-9, 9-16, and 10-7.
Financial Accounting can be challenging—especially for MBA students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each module and to ensure student comprehension, we include mid-module and module-end reviews that require students to recall and apply the financial accounting techniques and concepts described in each module. For representative examples, SEE PAGES 4-8, 7-11, 8-14, 9-16, and 10-11.
Students retain information longer if they can apply the lessons learned from the module content. To meet this need for experiential learning, we conclude each module with a hands-on analysis project. A series of questions guides students’ inquiry and helps students synthesize the material in the module and integrate material across modules. For representative examples, SEE PAGES 1-42, 4-58, and 9-55.
Excellent assignment material is a must-have component of any successful textbook (and class). We went to great lengths to create the best assignments possible from contemporary financial statements. In keeping with the rest of the book, we used real company data extensively. We also ensured that assignments reflect our belief that MBA students should be trained in analyzing accounting information to make business decisions, as opposed to working on mechanical bookkeeping tasks. There are six categories of assignments: Discussion Questions, Mini Exercises, Exercises, Problems, IFRS Applications, and Management Applications. For representative examples, SEE PAGES 4-37, 6-45, and 9-41.
Sixth Edition Changes
Based on classroom use and reviewer feedback, a number of substantive changes have been made in the sixth edition to further enhance the MBA students’ experiences:
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 Japan, Sweden, Austria, the Netherlands, the UK, as well as from the U.S. The U.S. companies range from small-cap to major multinationals. Each case deals with a specific financial accounting topic within the context of one (or more) company's 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 email@example.com.
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|Module 01: Financial Accounting for MBAs (pg. 1-1)|
|Module 02: Introducing Financial Statements and Transaction Analysis (pg. 2-1)|
|Module 03: Accounting Adjustments and Constructing Financial Statements (pg. 3-1)|
|Module 04: Analyzing and Interpreting Financial Statements (pg. 4-1)|
|Module 05: Reporting and Analyzing Operating Income (pg. 5-1)|
|Module 06: Reporting and Analyzing Operating Assets (pg. 6-1)|
|Module 07: Reporting and Analyzing Nonowner Financing (pg. 7-1)|
|Module 08: Reporting and Analyzing Owner Financing (pg. 8-1)|
|Module 09: Reporting and Analyzing Intercorporate Investments (pg. 9-1)|
|Module 10: Reporting and Analyzing Off-Balance-Sheet Financing (pg. 10-1)|
|Module 11: Forecasting Financial Statements (pg. 11-1)|
|Module 12: Analyzing and Valuing Equity Securities (pg. 12-1)|
|Appendix A: Compound Interest Tables (pg. A-1)|
|Appendix B: Constructing the Statement of Cash Flows (pg. B-1)|
|Appendix C: Comprehensive Case (pg. C-1)|
|Appendix D: Chart of Accounts with Acronyms (pg. D-1)|
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Last Updated: Jan 2 2016
Practice Quiz Solutions
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Appendix C PDF
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