Reading Financial Reports For Dummies [Paperback]

Lita Epstein (Author)

Book Description

Series: For Dummies (Lifestyles Paperback) | Publication Date: December 24, 2004

The U.S. government began standardizing and regulating financial reporting in 1929 when the stock market crash made it painfully clear that businesses often made absurd claims and that investors were either gullible, unable to verify information, or both. Now, financial reports are used by a company’s management to measure profitability (or lack of it), optimize operations and guide the company, by banks and other lenders to gauge the company’s financial health, and by institutional or individual investors interested in purchasing stock.

Unless you’re financially savvy, annual reports with all those figures, frustrating footnotes, and fine print are boring and intimidating. However, once you have a fundamental knowledge of finance and its basic terminology, you can find the juicy parts. Reading Financial Reports For Dummies by Lita Epstein, a teacher of online financial courses and author of Trading for Dummies, gets you up to speed so you can:

• Go past the prose that can maximize the positive and minimize the negative and get information in dollars and cents
• Get an overview from the big three—the balance sheet, income statement, and statement of cash flows
• Understand the lingo and read between the lines
• Calculate basics like PE, Dividend Payout Ratio, ROS, ROA, ROE, Operating Margin, and Net Margin

It pays for investors to be somewhat skeptical instead of gullible. Pressured to please Wall Street, companies are sometimes tempted to use “creative” accounting. You’ll discover how to:

• Detect red flags (that, unfortunately, aren’t emphasized in red) such as lawsuits, changes in accounting methods, and obligations to retirees and future retirees
• Understand the different reporting requirements for public companies and private companies with various types of business structures
• Analyze a company’s cash flow, a prime indicator of its financial health
• Scrutinize deals such as mergers, acquisitions, liquidations and other major changes in key assets

Organized so you can start where you’re comfortable and proceed at your own pace, Reading Financial Reports for Dummies helps managers prepare annual reports and use financial reporting to budget more efficiently and helps investors base their decisions on knowledge instead of hype. Whether you’re in business or in the stock market, knowledge is always an asset.

Editorial Reviews

From the Back Cover

Simple strategies for measuring a company's financial health

Decipher the jargon and read financial reports like a pro

Whether you're a serious investor or hold a few shares in the company you work for, reading financial reports is a vital way to keep tabs on a company's performance. This clear and friendly guide will help you wade through the numbers to see what's really going on — so you can make smarter and more profitable investment choices.

Discover how to:

• Make sense of balance sheets
• Find the figures that tell the tale
• Test the numbers with simple formulas
• Recognize red flags in the footnotes
• Understand deceptive accounting practices

About the Author

Lita Epstein is a writer and a designer and teacher of online financial courses, as well as the coauthor of Trading For Dummies.

Product Details

• Paperback: 384 pages
• Publisher: For Dummies (December 24, 2004)
• Language: English
• ISBN-10: 0764577336
• ISBN-13: 978-0764577338
• Product Dimensions: 9.1 x 7.4 x 1.1 inches
• Shipping Weight: 1.3 pounds
• Average Customer Review: 4.7 out of 5 stars  See all reviews (19 customer reviews)
• Amazon Best Sellers Rank: #529,584 in Books (See Top 100 in Books)

More About the Author

I enjoy translating complex financial and political topics critical to people's everyday life in language that can be easily understood. I do this through my non fiction "how to" books for the Dummies series and the Idiot's Guides. I have more than 25 finance and political books on the market. Prior to writing books, I've worked as a daily newspaper reporter, a magazine editor, a press secretary for a U.S. Congressman and a fund raiser for former President Jimmy Carter, so he can continue his international work through The Carter Center. I earned my MBA at Emory University's Goizueta Business School and my BA at Rutgers University.

Customer Reviews

Most Helpful Customer Reviews

87 of 91 people found the following review helpful:

5.0 out of 5 stars Excellent value ... just buy it!, March 24, 2007

By 

J. Sims (Denver) - See all my reviews
(REAL NAME)   

This review is from: Reading Financial Reports For Dummies (Paperback)

I recently had to take a week long seminar about financial statements and didn't want to go in cold turkey and possibly embarass myself ... so I bought three books thru Amazon to help me learn about financial statements, this one being the most comprehensive.

I'll make this short and sweet ... this was an excellent book by any standard ... the other two books were brief and excellent overviews, but I'd have to judge Lita's (author) book as superb.

It was as if I learned detail from a text book (factual substance), but then had her sitting beside me saying ... ok, you know such and such, now this is how it really works, or this is how you apply it, or this is what it means, or this is what you need to do next, or these are the tricks of the trade only insiders know, etc. Plus her 10 real world discussions of what went wrong with certain corporations ... Enron, WorldCom/MCI, Tyco, etc., are very interesting reads.

For instance, she tells you how to go about listening to a call between analysts and corporate executives, which honestly I did not know you could do. It's this added perspective of an experienced insider's knowledge of the business that puts her above the rest ... and this being a 362 page book, which I read cover to cover, there are plenty of these types of examples.

For anyone who is not well versed in this subject matter, but WANTS to learn about it, quit pondering the purchase and just buy the book. It is money well spent ... I guarantee it.

Oh, and by the way, Lita dedicates the book to her father, who was an auditor and savings and loan examiner ... so you know she was taught plenty by ole Dad ... this stuff was in her blood from the get go, and she communicates her extensive knowledge very well.

I sincerely congratulate her on such a fine work. I enjoyed it immensely! Thank you Lita ... Jim

34 of 36 people found the following review helpful:

5.0 out of 5 stars Even Better Than I Had Hoped..., July 14, 2007

By 

D. Portney "Confidence Expert" (Los Angeles, CA USA) - See all my reviews
(REAL NAME)   

This review is from: Reading Financial Reports For Dummies (Paperback)

I've never taken the time to leave feedback about any books I buy, but this book I really got a lot out of, and highly recommend.

Although the description of the book seems to mostly focus on reading financial reports in order to evaluate companies you might want to invest in by buying stock, I bought the book because I wanted to be much more comfortable with reading - moreover analyzing and understanding - financial statements for business management purposes.

Boy, I was NOT disappointed! By reading the book and constantly referring to the financial statements of 2 companies (Mattel and Hasbro), and interpreting, analyzing and comparing the numbers, I have really learned quite a lot about how to manage by the numbers. Now, when I look at financial statements, I know what every line means, I know what I'm looking for, how to interpret the numbers and changes in the numbers and/or ratios over time - I'm truly just as pleased as punch! This book is worth every penny you pay for it.

And, because the author also tosses in a lot of revealing and useful information about analyzing financial statements to evaluate a company and the worth of its stock, I received quite an education there as well. Very eye opening.

Whether you're a business owner, manager, accountant or stock investor, if you're even considering getting this book to enhance your knowledge, get it. It's a very, very good book. I kept a highlighter and some post it notes at my side, you may want to do the same. In any event, after reading this book (which, by the way is NOT a 'dry' read) you will have deep knowledge of financial statements - balance sheet, profit and loss (income statement) and cash flow statement.

I highly recommend this book.

21 of 22 people found the following review helpful:

5.0 out of 5 stars If you had to read only one investment book, this one should be it!, April 17, 2008

By 

Houman Tamaddon "Rational Investor" (Seattle, WA) - See all my reviews

Amazon Verified Purchase

This review is from: Reading Financial Reports For Dummies (Paperback)

This is the single best book for beginner and intermediate-skilled investors. I believe most non-professional investors will find this an absolute gem. The writing is clear and actually fun to read. You will learn the basics of how to evaluate companies, but Epstein includes nuances that even more advanced investors will find useful.

The book is valuable because of its appropriate coverage of 4 separate areas:
1) Teaches the reader basic accounting. For example, what do different items on a cash flow statement really mean and how are they related to the balance sheet or the income statement?
2) Once you understand basic accounting, it teaches you how to manipulate some of these numbers to get a better understanding of how well the company is doing. For example, what is the significance of inventory turnover?
3) Points you to other sources for more information and greater understanding ie: different websites and how to get bond ratings on particular companies.
4) Discusses pitfalls of analyzing financial reports. She discusses how companies manipulate numbers and how you can improve your chances of catching the culprits. She discusses 10 guilty companies.

There are many great books investors should read, but if you were only allowed one then this should be the one. Bravo Lita!
P.S. I am not a generous Amazon reviewer as you can see for yourself by reading my other reviews.