Financial Fine Print: Uncovering a Company's True Value [Hardcover]

Michelle Leder (Author)

Book Description

Publication Date: July 25, 2003 | ISBN-10: 0471433470 | ISBN-13: 978-0471433477 | Edition: 1

Thirty-five million individual investors jumped into the stock market for the first time during the late 1990s without asking questions about the stocks they were buying. When the bubble burst and the large number of accounting scandals began to grow, most investors didn’t know where to turn or whom to trust. Now it has become more important than ever for investors to take matters into their own hands.

Financial Fine Print: Uncovering a Company’s True Value lets individual investors in on the secrets that seasoned professional investors use when they evaluate a potential investment. Buried deep in a company’s quarterly (10-Q) and annual (10-K) reports are the real clues to a company’s financial health: the footnotes. At many large companies, these footnotes can run for more than 30 pages and for some corporations have doubled in the past five years, making them simply too important for investors to ignore.

Financial Fine Print spells out exactly what investors need to look for within the footnotes of a company’s reports in order to make better, more informed decisions. By using numerous examples of actual footnotes that have appeared in SEC documents, the book teaches investors in easy-to-understand language ways to spot – and avoid – future Enrons and Worldcoms (and Tycos and Adelphias and HealthSouths). For any investor who has spent the past three years watching their investments shrink and has begun to think about getting back into the market, this book provides the critical tools that investors need to know to avoid getting burned once again.

Editorial Reviews

Review

"A must read for any investor serious about knowing what they own." (Herb Greenberg, Columnist, TheStreet.com, Fortune Magazine)

"It's beautifully written, combining both warmth and clarity, and as easy to read as it is to understand." (Better Investing Magazine, October 2003)

"The Financial Fine Print here is readable, useful and potentially profitable!" (Barron's Magazine, December 1, 2003)

"In my opinion "Financial Fine Print" is a must-read for any investor who wants to pick his or her own stocks." (Pittsburgh Tribune, December 21, 2003)

"With a book as indispensable as this, there's no...excuse to avoid wading into the thicket of footnotes before making financial decisions." (Better Investing Magazine, December 2003)

"Financial Fine Print: Uncovering a Company's True Value is one of the most informative books ever written for investors" (From the Foreword by Thornton "Ted" Oglove)

From the Inside Flap

"Always read the fine print." It’s one of life’s basic maxims, and for the individual investor, still smarting from recent market meltdowns, the saying goes double. Too many claims of miraculous earnings have been revealed as accounting mirages, with small shareholders among the biggest losers.

Prudent investors want the whole story, not just the rose-colored version of events that managers tend to portray. Yet how do you uncover it, given the huge amount of available information? The trick is simply knowing where and how to look.

Financial Fine Print is a great place to start. Written by veteran financial journalist Michelle Leder, this book lays bare the accounting tricks companies use to whitewash their numbers. Using a clear, no-nonsense style and pointing out numerous scandals and red flags, Leder sheds light on the most obscure yet most essential aspect of annual reports and SEC filings: the footnotes.

With the knowledge and techniques detailed in Financial Fine Print, you’ll learn:

• Why one number buried deep within the pension footnote can speak volumes about whether the company’s other numbers are trustworthy
• What sorts of insider transactions investors need to pay close attention to
• Where companies tend to hide their debt and other obligations
• How some companies seem to take "special" charges every quarter and how that impacts the bottom line
• When to avoid a stock because the red flags are simply too numerous

"Too many companies would prefer that you not read the footnotes," notes former SEC Chairman Arthur Levitt. "That should be incentive enough to delve into them." As investor skepticism builds and the specters of Enron, Worldcom, Adelphia, and Global Crossing loom large, companies trying to prove themselves above-board have added more footnotes and documentation than ever to their reporting. This makes learning the lessons of Financial Fine Print all the more important. Because the simple fact is that if you want to own individual stocks, you need to do your homework.

See all Editorial Reviews

Product Details

• Hardcover: 256 pages
• Publisher: Wiley; 1 edition (July 25, 2003)
• Language: English
• ISBN-10: 0471433470
• ISBN-13: 978-0471433477
• Product Dimensions: 6.5 x 0.7 x 9.6 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 4.6 out of 5 stars  See all reviews (18 customer reviews)
• Amazon Best Sellers Rank: #103,268 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

88 of 99 people found the following review helpful

2.0 out of 5 stars The irony of book -- the book itself is overhyped. February 9, 2004

By Chungst

Format:Hardcover

"Financial Fine Print", in my opinion, provides insufficient analytically challenging insights for those who work in the financial service industry, mainly as an Analysts or Portfolio Managers. However, for those who new to the financial statement / analysis process, the book is a decent primer to understand the importance of financial reports (i.e. footnotes). The biggest disappointment about the book was that it was over-hyped. The book not only read like it was hastily assembled but felt like a 30-page pamphlet of footnote tidbits stretched to 173 pages.

Firstly, I completely disagree with the subtitle of the book: "Uncovering a Company's True Value" as it is misleading. Gaining information from Ms. Leder's book will not result in uncovering a company's **true** value. The book will allow the novice or untrained Analysts / PMs to focus on areas that may shed more light on the company's financial operating results, financial condition, and/or cash flow generating abilities. However, such cursory coverage of said materials is insufficient to arrive at a company's **true** value.

Secondly, the writer fails to fully understand the analytics related to a majority of the subject matters. Allow me to use Chapter 8 that addresses off-balance obligations. On page 133, the writer describes a "Synthetic Lease" but fails to explain or differentiate the lease from any other FASB #13 operating lease. Second, on page 130, the writer tries to educate the reader on the importance of off-balance liabilities with the following remark: "... is to imagine how your bank account balance would improve if you didn't have to account for the monthly mortgage payment." However, her example is faulty and dangerously misleading. If a company has an off-balance sheet operating lease, the reader ought to see the rental (or lease) expense in the income statement. Had the company chose to own the asset outright, the reader would see depreciation (and possibly interest) expense in lieu of the rental expense, other things being equal. That is to if someone didn't account for his "monthly mortgage payment," then common sense would dictate that someone is "renting" his place.

Lastly, the writer tries to add credibility to her work by randomly inserting quotes from a limited number of "experts," that tends to get recycled through-out the book. While some of the people mentioned in the book are highly respected in the industry (i.e. Pat McConnell and David Zion), it was disappointing to find out Ms. Leder did not interview some of the leading researchers from the accounting academia. In fairness, Ms. Leder did provide some accounting research, albeit woefully inadequate for a book of this scope.

In summary, Ms. Leder's book is great for a novice who wants to understand the role footnotes play in financial statement analysis. However, her book was over-hyped for the more experienced or serious students of financial statement analysis.

9 of 9 people found the following review helpful

5.0 out of 5 stars A bible for the do-it-yourself investor! October 1, 2003

By Brian Thompson

Format:Hardcover

As an active long-term investor who reads a lot, I was always frustrated by all those experts who kept telling me to read the footnotes, without giving me any clues as to what I was supposed to be looking for. This book, which I zipped through in a weekend -- gives me exactly what I need to know to avoid potential problems: options, pensions, and my personal favorite, recurring special charges -- using examples from actual SEC filings. With Leder's help, I now feel comfortable skimming these hefty documents. Also good: her website, www.footnoted.org, where she provides daily updates of things -- both good and bad -- that she finds buried in SEC documents. It's become part of my daily routine!

11 of 12 people found the following review helpful

5.0 out of 5 stars Financial Fineprint February 11, 2004

By Josh Brackeen

Format:Hardcover

Is there any way an ordinary investor can protect themselves from shady corporate accounting? YES!! Michelle Leder's book Financial Fineprint has given me the tools to become a better investor.

Not only does she do an excellent job of breaking down annual reports and SEC filings in a very organized and clearly written manner , she also provides an invaluable service by guiding the reader through the footnotes of financial statements, pointing out indicators of accounting tricks and obscuring tactics. Ms. Leder gives the average investor the means to find out for themselves about the companies they invest with. I can now spot those Inflated profits, questionable related party transactions, hidden expenses, etc., before I decide to buy a particular stock.

This book is not simply a "How to" book, however, as it is written in a more narrative and reader friendly style, with personal accounts and fun annecdotes.

I highly reccomend this book for anyone who wants to have as much knowledge at their fingertips as possible before making important financial decisions.