Features actual case studies using analytical
Table of Contents
Preface xi
Acknowledgments xv
Chapter 1: Overview of the Companies 1
The Four Companies 2
Company 1 2
Company 2 5
Company 3 8
Company 4 10
Summary 16
Chapter 2: The “Norm” and the “Forensic” Preliminary Analytics: Basics Everyone Should Know 19
Liquidity Ratios 20
Working Capital 21
Working Capital Index 21
Working Capital Turnover 22
Current Ratio 22
Case Studies: Liquidity Ratios 22
Profitability Ratios 25
Gross Profit 26
Gross Profit Margin 26
Stock Sales 26
Return on Equity 27
Case Studies: Profitability Ratios 27
Company 1 31
Horizontal Analysis 36
Company 1 36
Company 2 43
Company 3 50
Company 4 61
Vertical Analysis 66
Company 1 66
Company 2 70
Company 3 73
Company 4 79
Summary 79
Chapter 3: The Importance of Cash Flows and Cash Flow Statements 83
Cash Flows and Net Income 85
Company 1 87
Company 2 89
Company 3 92
Company 4 97
Other Cash Flow Techniques 100
Company 1 101
Company 2 104
Company 3 107
Company 4 114
Summary 117
Chapter 4: The Beneish M-Score Model 119
Company 1 124
Company 2 133
Company 3 143
Indices of the Primary Government 145
Indices of the Governmental Funds 151
Company 4 158
Summary 166
Notes 170
Chapter 5: The Accruals 171
Dechow–Dichev Accrual Quality 173
The Four Companies: Dechow–Dichev Model 175
Sloan’s Accruals 184
The Four Companies: Sloan’s Model 185
Jones Nondiscretionary Accruals 191
The Four Companies: Jones Model 192
Summary 196
Notes 198
Chapter 6: Analysis Techniques Using Historical Financial Statements and Other Company Information 199
The Piotroski F-Score Model 200
Company 1 203
Company 2 205
Company 3 207
Company 4 212
Lev–Thiagarajan’s 12 Signals 215
Company 1 220
Company 2 222
Company 3 225
Company 4 230
Summary 233
Notes 235
Chapter 7: Benford's Law, and Yes—Even Statistics 237
Benford’s Law 239
Company 1 243
Company 2 249
Company 3 255
Company 4 267
Simple Statistics 272
Company 1 277
Company 2 281
Company 3 284
Company 4 289
Summary 290
Note 292
Chapter 8: Grading the Four Companies 293
Company 1 294
Company 2 302
Company 3 310
Company 4 320
Summary 326
Bibliography 329
About the Author 331
Index 333
