How to Read a Financial Report: Wringing Vital Signs Out of the Numbers

 
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Product Description

A valuable resource for translating financial reports into real, meaningful information for investors

Financial reports provide vital information to investors, lenders, and managers. Yet the statements in a financial report seem to be written in a foreign language that only other accountants can understand. This Seventh Edition of the bestselling How to Read a Financial Report breaks through the language barrier, clears away the fog, and offers a plain-English user's guide to financial reports. It helps readers get a sure-handed grip on the profit, cash flow, and financial condition of any business. New information found in this updated edition include: discussions of the transition to international accounting and financial reporting standards; reflections on financial reporting and auditing in the post-Enron era; detailed illustrations that explain connections between the three financial statements; and much more.

John A. Tracy, CPA (Boulder, CO), is an award-winning Professor of Accounting, Emeritus, at the University of Colorado at Boulder. His other books include The Fast Forward MBA in Finance, Second Edition (978-0-471-20285-1), Accounting for Dummies, Fourth Edition (978-0-470-24600-9), and Accounting Workbook for Dummies (978-0-471-79145-4). Tracy has also served on the board of directors of a bank, and has taught executive development programs.

Customer Reviews:

  • Excellent for first time user (FIRST time user)
    This book is a good choice for someone who don't now anything about financial reports.

    I'm no expert but I'm more than novice. It didn't help me much. If you know already something, don't buy this book. But if this is your FIRST step reading financial reports, this is a great book.
    ...more info
  • One of the most useful presentations of this topic ever.
    I have used this book to teach people with absolutely no training in accounting to understand financial statements. It appeals to non-quantitative and quantitative audiences alike. Non-quantitative audiences appreciate the plain language in which the book is written. Quantitative audiences immediately see how financial statements are laid out from a modelling point of view and invariably start coding up spreadsheets. People who need to explain anything related to financial statements should thoroughly read this book to see how clearly this topic can be treated.

    Another aspect of this book is the ratio of success-to-effort one gets out of reading this book. Professsor Tracy's experience and time spent thinking about this topic is clearly demonstrated by his ability to explain just enough to allow even the rank beginner to understand financial statements....more info

  • Sheer Gold: Buy It
    This little gem is extremely lucid and -- dare I say -- fun to read.

    Consider this book the best $20 investment you'll make this year.

    Whether you're a 1st year MBA, stockbroker, or lawyer -- or just someone who wants to learn how to read the 10Ks/Qs you get in the mail -- this book has something for you....more info
  • great book
    I spent a long time trying to find a book that could help me read a financial statement. It needed to be simple without sacrificing substance. Finally I found this book. It shows how income, cash flow, and balance sheet are related, in a visual, line by line way.

    I think the only way you could do it better is by having a spreadsheet which linked all these together, which you could play with and see the linkages in action. But barring that, this book is great.

    It does require study, but I don't think it requires much accounting background. I had no business or accounting background, and I found this book approachable.

    The one downside is that it doesn't teach you how to interpret a financial statement. It teaches you to understand how one works, and how it fits together. But how to spot things that might be "troublesome" or in need of further inquiry in a real business report, this book doesn't tell you.

    You need another book for that sort of thing. And I haven't found one of those yet -- that is simple and strong in its own way....more info
  • Read this BEFORE you take accounting!
    As a first year MBA in the middle of my accounting course I was still struggling. I'd aced Accounting as an undergrad, but only then realized Accounting in undergrad is more akin to book-keeping than financial analysis - BIG difference!

    A friend recommended this as an additional book that might help explain things, so I ordered a copy. If only I'd read this before starting the course! It explains, in neat and concise language, many of the concepts with which I'd been having a large amount of trouble. It quickly shows how the balance sheet, income statement, and cash flow statement work together to explain what is happening in the business.

    My only complaint is that this book doesn't really discuss journal entries. Perhaps that's intentional and might be one reason why this book works, but given how effective it is at simplifying everything else, I would love to have the benefit on Tracy's insight on this as well.

    While this book would never replace a full accounting textbook, it should be required reading before ever touching any major text. By focusing on one single company and set of statements, you can concentrate on the concepts without having to try to understand a different set of numbers. This makes a world of difference when trying to understand how everything works together. Once these basic concepts are understood, more advanced details make more sense and things fall into place much, much faster.

    Make no mistake: accounting is a different language that takes a long time to learn. Think of this book as a phrase book you use to learn the essentials before (if you must) tackling how the language works. No, you won't be able to tear apart the books and become a genius investor, but it'll turn on the lightbulb that will let you understand other books....more info
  • Won't Help You Understand ENRON.
    Concepts such as pro forma statements and restatement of earnings just aren't addessed in this 1999 book. Time for another update!...more info
  • excelllent intro
    This book is excellent in the following ways :

    -succeeds in explaining in a concise (+- 100 pages) and clear way the basic principles of financial statements.
    -the special format of the book is excellent in that it shows most examples and related text without having to turn the pages.
    -there is enough white space, allowing you to make annotations.

    Strongly adviced for anybody owning a company or for management / accounting students....more info

  • its all in the graphics
    i have a limited knowledge of accounts, & this book was absolutely brilliant in bringing me up to speed with the basic mechanics, rather than the whys of it all. The lucid manner in which the subject matter is explained hinges on the graphical layout employed allowing you to become involved in the process.
    It does not set out to be exhaustive & other books should be used for in depth studies (eg identifying suspicious activities). It is however excellent in accomplishing precisely what it sets out to achieve and brings life to the numbers. All it needs now is a color edition, enabling more complex modelling....more info
  • Not basic enough, not thorough enough.
    This is a somewhat strange introduction to the reading and interpretation of financial statements. The book is not basic enough for newcomers, yet it is not thorough enough for experienced people either.

    The main problems I have with this book are 1) the language is sometimes difficult to understand especially in the introductory chapters of the book, and 2) the book gives a lot of "don'ts" but not many "do's" - for instance regarding the measurement of cash flow, the author tells you all the wrong ways of doing it, but neglects to tell you the right way of measuring cash flow.

    I have given the book 3 stars because it does have some interesting parts. But if you're new to accounting I would instead recommend getting the book Financial Statements by Thomas Ittelson.

    PS: This review is for the Sixth Edition of the book.
    ...more info
  • Very Good~
    The book is completely new and I received it only a few days after I ordered it....more info
  • So good, our investment club is all reading it
    No matter how hard I listen to people explain financial reports to me, I just don't get it. This book is a show-n-tell, which for me, is the way I learn. Don't get me wrong, this is not a "simple" book. Our investment club is meant to be educational. This book is an excellent teacher....more info
  • Excellent intro to reading financials
    This book is the excellent primer for people starting to analyze financial reports. I bought this book for my Personal MBA book club. I like its structure and layout. I learned a lot from this book.
    It even taught me how to have an intelligent conversation with my "real" MBA friend....more info
  • Arrows, Diagrams, and Simple Explanations
    If you already know how to read financial reports like a pro or you work in the accounting department as an auditor, this book is definitely not for you. However, if the reams of reports spit out by corporations dumbfound you or you just feel intimidated when your accountant hands you a P&L, this book is perfect for you!

    The author starts by explaining, line-by-line, each item in each type of report: Cash Flows, Balance Sheets, and more. The author then uses good ol' fashion simple diagrams and arrows that show direct interactions between lines in each report. The concepts are as easy to grasp as "if this number goes up, this other number goes down and here's why." It's just that elegant!

    In my opinion, this should be required reading for any college graduate. In today's world a certain level of business acumen is expected which includes the ability to read and comprehend basic financial reports. This book gives you enough knowledge so that you can comfortably understand those reports. Of course, you can always delve deeper, if you choose, but keep in mind that this book is for the uninitiated which is just perfect for most of us mere mortals.
    ...more info
  • Read this BEFORE you take accounting!
    As a first year MBA in the middle of my accounting course I was still struggling. I'd aced Accounting as an undergrad, but only then realized Accounting in undergrad is more akin to book-keeping than financial analysis - BIG difference!

    A friend recommended this as an additional book that might help explain things, so I ordered a copy. If only I'd read this before starting the course! It explains, in neat and concise language, many of the concepts with which I'd been having a large amount of trouble. It quickly shows how the balance sheet, income statement, and cash flow statement work together to explain what is happening in the business.

    My only complaint is that this book doesn't really discuss journal entries. Perhaps that's intentional and might be one reason why this book works, but given how effective it is at simplifying everything else, I would love to have the benefit on Tracy's insight on this as well.

    While this book would never replace a full accounting textbook, it should be required reading before ever touching any major text. By focusing on one single company and set of statements, you can concentrate on the concepts without having to try to understand a different set of numbers. This makes a world of difference when trying to understand how everything works together. Once these basic concepts are understood, more advanced details make more sense and things fall into place much, much faster.

    Make no mistake: accounting is a different language that takes a long time to learn. Think of this book as a phrase book you use to learn the essentials before (if you must) tackling how the language works. No, you won't be able to tear apart the books and become a genius investor, but it'll turn on the lightbulb that will let you understand other books....more info
  • Good resource for building Excel model--even better if...
    This book is an excellent resource for those trying to build a spreadsheet model. It would be even more useful if it had numbers to tie-out to for monthly and quarterly financial statements...more info
  • Uses Visuals to Show Financial Relationships
    How to Read a Financial Report uses a lot of visuals to show the relationships between balance sheets, income statements, and statements of cash flow. If you have ever looked at a financial report and wondered what everything meant, this book is for you. This book took me from knowing hardly anything about financial statements to being able to understand them. I highly recommend this book to both investors and business owners....more info
  • If you want to understand how financial reports work, this book is for you!
    I took an accounting course my freshman year in college and thought it was the most dull class I had ever taken so I barely went to class and struggled my way through. Three years later I had an internship with a hedge fund working as an analyst so I needed to freshen up on my financial report reading skills. Someone in my office suggested this book and I am extremely thankful that they did because it was a tremendous help! It gives you a very strong (though probably basic) understanding of how to read AND understand a balance sheet, income statement and statement of cash flows. Not only does the book go through each of these elements of a financial report seperately, it also shows how they are all interrelated and connect to one another, giving one a better understanding of the big picture. I would definitely recommend this to someone who does not have a very solid background in accounting or understanding of financial reports. ...more info
  • Excellent Introduction
    This is a great book to start in financial statement analysis. It is targeted for someone with basic to intermediate background in accounting. The book is concise and well-written. The concepts are explained in a clear and intuitive way....more info
  • disappointed
    John Tracy does explain the 3 important "sheets" of a complete financial report. But he failed to help me understand what can be ascertained from more abstract concepts like cash flow or depreciation. His (lack of decent) explanation of why depreciation expense shows up in cost flow calculation appears to account twice for the same $ (once in profit and once in cash flow). His explanation of trying to use EPS & P/E ratio to determine the value of a privately held company share went no futher than this: "you could try to sell my your privately held share at any price you want, but I wouldn't have to accept it". That's not an explanation, just a statement of the obvious. The book needs more prose and examples of how the concept of a healthy (or unhealthy) company can be determined from a financial report. In fairness to Tracy, perhaps the latter half of the book addresses my needs, but I quit at page 76 (1/2 way through the book) after an inadequate explanation of depriciation expense as positive cash flow. I'll give another, more rigourous text a chance at that....more info
  • Excellent book for those who know little about accounting
    I bought this book along with Ittelson's Financial Statements. I was not sure which one to get so I got both thinking one would be repetitive but not as good. They were both excellent and together increased my accounting knowledge tremendously (No, I am not trying to drum up business for Amazon). Tracy's book is clear and has a nice logical flow to it. It would be great for managers, investors, and students. If you are trying to decide between this and Ittelson, I don't think you can go wrong with either one. They are both excellent and even complement each other so consider buying both of them....more info
  • You will learn how to read and use financial statements more easily than you dreamed possible
    The idea of trying to read the financial reports of your company (or any other company) may seem both daunting and boring. In reality, it is neither. The financial reports of a company can tell you a great deal about its financial health, its current performance, the way the management team is running the company, and can help you see the storm clouds on the horizon rather than waiting until the lightening is crashing and the winds are blowing all around you.

    John Tracy is not only a financial and accounting expert; he is also a gifted and successful teacher on this subject. You can benefit from his talent and experience by getting this book and working through it. He makes the subject of financial statements easy to understand. You will learn what the statement of cash flows, income statement, and balance sheet are, what they tell you, how they fit together, and how you should use them. The author provides just enough technical material to give you real information, but narrows the focus enough so you aren't distracted by other details or overwhelmed by an ocean of information.

    A terrific little book on a very important subject.

    Reviewed by Craig Matteson, Ann Arbor, MI
    ...more info
  • From a lay point of view
    Some friends and I have been looking into buying a media company, and none of us have had any experience running a large corportation, or even much in the way of collegete education in financing. This book enabled us to run a high-level diagnostic on the financial health of our prospective business, and recognize certain significant challenges. Consequently, we have had second thoughts, and are proceeding with caution--or at least now we are in a position to make more informed desicions. Amazingly, we were able to find ways to improve the company's financial situation that the CFO has apperantly overlooked--and he's an MBA. ;-)...more info
  • Quick and excellent read!
    Well written and informative. Book is divided into short and very digestible chapters that focus on various aspects of financial reporting. I found the information on the future of the auditing and financial reporting industry following the downfall of Enron and Worldcom and the passage of Sarbanes-Oxley to be particulary timely and interesting. ...more info
  • Don't read "Finance for Dummies"! Read this book
    Everyone is familiar with the "Dummies" book series, and, perhaps, we all have a dozen of them on our shelves. In many cases, we reach for the "Dummies" books, because they represent our first foray into a subject we know nothing about, like "Fishing for Dummies," and we feel like we need to get a "handle" on it. In other words, we are non-experts, we'd like to learn from the experts, but we don't want to become an expert. We just want to "understand" the subject, so that we don't look stupid at work or during cocktail party conversations.

    The big "letdown" with most "Dummies" books I've read is that they're too wordy, too thin on substance, and you feel like you're wanting more. THIS IS NOT THE CASE WITH "HOW TO READ A FINANCIAL REPORT" BY JOHN TRACY.

    Instead, Tracy's book is that rare book for "non-majors" that is written clearly, does not require prior knowledge of the subject, and may be all that a "non-financial" manager, such as a salesperson, marketing manager, office manager -- or maybe even an individual investor -- might need to understand how to read balance sheet.

    Tracy's book is far from wordy, and, clocking in at around 100 pages, it is pithy. More importantly, the book is extremely well-illustrated in such a way that the reader is not treated to financial concepts, but is actually taught the "skill" of reading an income statement, a balance sheet or a cash flow report, something which "Fishing for Dummies" has yet to do for me.

    With Tracy's book, I will never have to read a 400-page tome on accounting or finance. If I am in trouble, I'll simply need to read this book, never confusing "net" and "gross" again....more info
  • A pleasure to read
    I am only a little way through the latest edition of "How to Read a Financial Report". One area i can already see as a huge plus is the style in which the book is written. Candidly, clearly and entertainingly relaying information on a topic that can so easily become one of the dreariest around has helped me understand and retain much more information on the terms and concepts I need to know.

    Without even finishing half of this book, I am compelled to offer a strong recommendation to anyone contemplating purchasing it. I have only done what could best be described as rudimentary level accounting previously. This has left me with a great number of terms and definitions but little real understanding on the interconnectedness of financial reports and the terms within them. "How to Read a Financial Report" essentially gathers all the pieces of the puzzle and clearly shows you how it is put together. Whilst I cannot comment on the latter half of the book, this explanation of the way the financial statements connect has already proven invaluable to me.

    I wholeheartedly recommend this book to anyone wanting to truly understand the nature of financial statements

    James.L,
    Sydney,
    Australia...more info

 

 
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