Part IV: Preparing and Using Financial Reports

In this part . . .

Financial reports are like newspaper articles. A lot of activity goes on behind the scenes that you may not be aware of. In reading a financial report, you see only the finished product. Chapter 12 gives the inside story of how financial reports are put together.

Outside investors in a business — the owners who are not on the inside managing the business — depend on its financial reports as their main source of information. Chapter 13 explains financial statement ratios that investors use for interpreting profit performance and financial condition. Serious investors must know these ratios.

The financial report is the end of the line for the outside investors and lenders of a business. They can't call the business and ask for more information. But the financial statements are just the starting point for the managers of the business. Chapter 14 explains the more detailed and highly confidential accounting information they need for identifying problems and opportunities.

Chapter 15 explains the reasons for audits of financial reports by independent CPAs. Investors and lenders definitely should read the auditor's report, which is explained in this chapter. The chapter also discusses the ugly topic of accounting fraud. Unfortunately, some businesses resort to accounting fraud, which is not only unethical but illegal.