CFA培訓(xùn)課程科目：FinancialStatementAnalysisReference:1.Juneweibook(2002)2.Schweserstudynotes3.CFALOS

FinancialStatementAnalysis:AnintroductionRoleoffinancialreporting:

Toprovideinformationaboutthefinancialposition,performanceandchangesinfinancialpositionofanentitythatisusefultoawiderangeofusers(investors,creditorsandotherinterestedparties)inmakingeconomicdecisions.Roleofkeyfinancialstatements:IncomeStatement:Revenue,expenses,gains/lossBalanceSheet:Asset,Liability,Owner’sEquityCashflowStatement:CFO,CFI,CFFStatementofchangesinowners’equity:reportschangesinequityinvestors’investmentoveraperiodoftime.FinancialStatementAnalysis:FinancialStatementAnalysis:AnintroductionFinancialStatementNotes:

Toprovidefurtherinformationofthefinancialstatements.Financialstatementnotesareaudited.e.g.accountingmethod,assumptionsandestimates;businessacquisitionsanddisposals,legalactions,employeebenefitplans(雇員福利計(jì)劃

),contingenciesandcommitments,significantcustomers,salestorelatedpartiesandsegmentreport.Supplementaryschedules:

e.g.Operatingincomebyregionorsegment;informationaboutfinancialinstruments.Supplementaryschedules(補(bǔ)充報(bào)表，補(bǔ)充費(fèi)率表)arenotaudited.Management’sDiscussionandAnalysis(MD&A):Providesassessmentofthefinancialperformanceandconditionofacompanyfromtheperspectiveofitsmanagement.FinancialStatementAnalysis:

StandardauditsOpinion’selementsIndependentreviewisperformed;Theauditorhasreasonableassurancethatthefinancialstatementcontainnomaterialserrors.Thefinancialstatementswerepreparedinaccordancewithacceptedaccountingprinciples.Otherdisclosures(被披露的秘聞):goingconcernassumptions;valuationorrealizationofassetvalues,ortolitigation;opiniononinternalcontrols.UnderSarbanes-OxleyAct,managementisrequiredtoprovideareportonthecompany’sinternalcontrol.StandardauditsOpinion(threetypes)UnqualifiedopinionQualifiedopinionAdverseopinionFinancialStatementAnalysis:Anintroduction

StandardauditsOpinion’sele

InformationusedforfinancialStatementAnalysisAnnualreport(includingfinancialstatements,notes,auditor’sopinion,MD&A)Quarterlyorsemiannualreports.SecuritiesandExchangeCommission(SEC)filings:Form8-K(acquisitionsanddisposalsofmajorassetsorchangesinitsmanagement)Form10-KandForm10-Q:Quarterlyorsemiannualreports.ProxyStatement(股東簽署的委托書

):containsinformationaboutelectionofboardmembers,compensations,managementqualifications,andissuanceofstockoptions(股票期權(quán)的發(fā)行

).CorporatereportandPressreleases(新聞稿

)(websites,notindependent)FinancialStatementAnalysis:Anintroduction

InformationusedforfinanciaFinancialReportingMechanics(財(cái)務(wù)報(bào)告機(jī)制

)GroupsofBusinessActivities(業(yè)務(wù)活動(dòng)

)anditsidentification

OperatingactivitiesProductionandTradeOthers:payingtax;buyingshort-termassets,takingonshort-termliabilities.

InvestingactivitiesAcquireordisposeoflong-termassets(PPEorland)Purchaseandsalesoflong-termsecuritiesissuedbyothers FinancingactivitiesIssuingandrepayingdebtIssuingandrepurchasingstockPayingdividendtoshareholders

Note:natureofthebusinessismoreimportantthannatureofthetransactions.FinancialReportingMechanics(FinancialReportingMechanicsAssetsAccountsGroupCashandcashequivalentsCurrentAssets(流動(dòng)資產(chǎn))MarketablesecuritiesCurrentAssetsInvestmentinaffiliatesInvestmentsAccountsreceivable–net(allowanceforbaddebtexpenseisusedascontraaccount（抵銷科目）)CurrentAssetsInventory（存貨）CurrentAssetsPrepaidexpensesCurrentAssetsProperty,plantandequipment–net(AccumulatedDepreciationisusedascontraaccount)Long-termAssetsIntangibleassets(patents,trademarks,licenses,goodwilletc.bereducedbyamortization（[?m?:ta?'ze??n]

n.

分期償還；[會(huì)計(jì)]攤銷；償還金；熄滅）)Long-termAssetsDeferredtaxassets（遞延所得稅資產(chǎn)

）Long-termAssetsFinancialReportingMechanicsAFinancialReportingMechanicsLiabilitiesAccountsGroupAccountspayableCurrentLiabilitiesFinancialliabilities-notespayable（金融負(fù)債應(yīng)付票據(jù)）CurrentLiabilitiesUnearnedrevenue（預(yù)收收入；非生產(chǎn)收入，非勞動(dòng)收入）CurrentLiabilitiesAccruedexpenses（應(yīng)計(jì)費(fèi)用）CurrentLiabilitiesLongtermdebt-bondpayable（長(zhǎng)期借款應(yīng)付債券）LongTermDebtCurrentportionoflongtermdebt（長(zhǎng)期負(fù)債的當(dāng)期部分）CurrentLiabilitiesIncometaxespayable（應(yīng)付所得稅）CurrentLiabilitiesDeferredtaxliabilities-shortterm（遞延所得稅負(fù)債短期）CurrentLiabilitiesDeferredtaxliabilities-LongtermDeferredTaxesFinancialReportingMechanicsLFinancialReportingMechanicsEquityAccountsGroupCapitalstock–Common(parvalue票面價(jià)值，面值，平價(jià)

)Shareholders'Equity股東權(quán)益

Capitalstock：股本

–Preferred(parvalue)Shareholders'EquityAdditionalpaid-inCapital：追加實(shí)繳股本

Shareholders'EquityRetainedearnings：未分配的利潤(rùn)

Shareholders'EquityOthercomprehensiveincome：綜合所得

(foreigncurrencytranslation,unrealizedgainsandlosses)Shareholders'EquityNote:thesumofthefirstthreeitemsiscontributedcapitalFinancialReportingMechanicsEFinancialReportingMechanicsRevenueAccountsGroupSales(day-to-dayactivities)RevenueGains(incidental,e.g.,salesofland,subsidiaries)RevenueInvestmentincome(interestincome,dividendincome)RevenueFinancialReportingMechanicsRFinancialReportingMechanicsExpenseAccountsGroupCostofgoodssoldExpenseSelling,generalandadministrativeexpensesExpenseDeprecationandamortizationExpenseTaxexpenseExpenseInterestexpenseExpenseLossesExpenseFinancialReportingMechanicsEFinancialReportingMechanicsUnearnedrevenue:cashreceivedbeforedeliveryofgoodsAccrued(unrecorded)revenue:RevenueearnedbutnotyetreceivedincashAccruedexpense:expenseoccurredbutnotyetpaidPrepaidexpense:expensepaidinadvancebutnotyetoccurFinancialReportingMechanicsUFinancialReportingMechanicsfinancialstatementelements(B/S)

Asset=Liability+EquityAsset=Liability+contributedcapital+endingretainedearningEndingretainedearnings=Beginningretainedearnings+NetIncome-DividenddeclaredEndingCash=beginningcash+netchangesofthecashFinancialReportingMechanicsAFinancialReportingMechanicsRelationshipoffinancialstatementelements

FinancialReportingMechanicsRFinancialReportingMechanicsDoubleentryaccounting:Debit:Increaseofassets,decreaseofliabilities,decreaseofequities;Decreaseofrevenue,increaseofexpenseCredit:Decreaseofassets,increaseofliabilities,increaseofequitiesincreaseofrevenue,decreaseofexpenseExample:At1Jan2007,thefirmhascashof50,000,netequipmentof4,000(withcostof9,000andaccumulateddepreciationof5,000),capitalstockof50,000,retainedearningof4,000..1)On28Jan,thefirmbuysinventoryfor8,000oncredit,andsellsitfor10,000oncredit.2)On15Mar,thefirmcollected5,000fromthiscustomer,andpaid3,000toitssuppliers.3)On18June,thefirmborrowed10,000frombanktopurchaseequipment.Theoldequipmentissoldat3,000.Thecostoftheoldequipmentis9,000anditsaccumulateddepreciationis5,000.4)On23Oct,thefirmissueddebtof30,000anduse20,000torepurchaseitsstock.Preparethefollowinggiventheinformationabove:Balancesheetasof31Dec2007,incomestatementfortheyear2007,cashflowstatementfortheyear2007,andequitystatementfortheyear2007FinancialReportingMechanicsDFinancialReportingMechanicsFlowofinformationinanaccountingsystem.JournalentriesGeneralledgerInitialtrialbalanceAdjustedtrialbalanceFinancialStatementNote:theanalystdonotknowtheprocess,butonlytheendingresult,thefinancialstatements.ReviewofthefootnotestothestatementsandMD&Aisnecessaryfortheanalysttojudgehowwellthefinancialstatementsreflectthetrueperformanceofthefirm.FinancialReportingMechanicsFFinancialReportingStandardTheimportanceofreportingstandardsinsecurityanalysismakethefinancialstatementscomparabletooneanothernarrowtherangeofthemanagement’sreasonableestimatesStandardsettingbodiesFASB(FinancialAccountingStandardsBoards)SetforthUSGAAP(USGenerallyAcceptedAccountingPrinciples)IASB(InternationalAccountingStandardsBoards)SetforthIFRS(InternationalFinancialReportingStandards)SomeoftheolderIASBstandardsarereferredtoasIAS.RegulatoryauthoritiesSEC(U.S.SecuritiesandExchangeCommission)

StrictFilingRequirementsforpubliclytradedfirms.(Form10-K,Form10-Q,Form8-K)Ongoingbarrierstodevelopingoneuniversallyacceptedfinancialreportingstandards.Differentstandard-settingbodiesandregulatoryauthoritiesofdifferentcountriesdisagreeonthebesttreatmentofaparticularitemorissue.FinancialReportingStandardThSECrequiredfilingFormS-1Form10-KForm10-QFormDEF-14AForm8-KForm144.Form3,4and5 SECrequiredfilingFormS-1FinancialReportingStandardIFRSframeworkObjectiveoffinancialstatement:fairpresentationofacompany’sfinancialperformance.QualitativeCharacteristicsoffinancialstatement:UnderstandabilityComparability&Consistency(acrossthefirmsandacrosstimeperiods)Relevance

(caninfluenceusers’economicdecisionsoraffectusers’evaluationsofpasteventsorforecastsoffutureevents).Reliability

(freeofmaterialerrors)Specificfactorsthatsupportreliabilityinclude:faithfulrepresentation;substanceoverform;Neutrality;Prudenceinmakingestimates;Completeness,VerifiabilityRequiredreportingElements:Assets,Liabilities,Equity,Income,Expense;Recognizediffutureeconomicbenefitfromtheitemisprobableandiftheitem’svalueorcostcanbemeasuredreliably.Measurementbases:Historicalcost,currentcost,realizablevalue,presentvalue,andfairvalue.

FinancialReportingStandardIFFinancialReportingStandardIFRSframework-continuedConstraintsBalancebetweenreliabilityandrelevance.Costthebenefitthatusersgainfromtheinformationshouldbegreaterthanthecostofpresentingit.Intangibleandnon-quantifiableinformationaboutacompany(reputation,brandloyalty,capacityforinnovation,etc.)cannotbecaptureddirectlyinfinancialstatements.AssumptionsAccrualbasisGoingconcernassumption(Ifnot,itsinventoryorotherassetsmayonlybeworththeirliquidationvalues.)

FinancialReportingStandardIFFinancialReportingStandardIFRSrequirementforfinancialstatementsRequiredfinancialstatement:B/S;I/S;CF/S;Equity/S(statementofchangeinowner’sequity);NotesFundamentalPrinciplesforpreparingfinancialstatement:Fairpresentation;Gongconcernbasis;Accrualbasis;Consistency;Materiality;(Freeofmisstatementthatcouldinfluencethedecisionsofusersoffinancialstatements)Principlesforpreparingfinancialstatement:Aggregationofsimilaritems/separationofdissimilaritemsNooffsettingofassetsagainstliabilitiesPresentclassifiedbalancesheetshowingcurrent/non-currentpartsMinimuminformationisrequiredoneachfinancialstatements.(mustshowspecificitems)Comparativeinformation FinancialReportingStandardIFFinancialReportingStandardUSGAAPvs.IFRS-comparetwofinancialreportingsystemsCharacteristicsofacoherentfinancialreportingframeworkTransparency:fulldisclosureandfairpresentationComprehensiveness:Alltypesoftransactionsthathavefinancialimplicationsshouldbepartoftheframework.Consistency:Similartransactionsshouldbeaccountedfornsimilarwaysacrosscompanies,geographicareas,andtimeperiods.FinancialReportingStandardUSFinancialReportingStandardBarrierstocreatingacoherentfinancialreportingframeworkValuation-Differentmeasurementbasesforvaluationinvolveatrade-offbetweenrelevanceandreliability.(e.g.FVneedmoresubjectiveadjustment)StandardsettingIFRS-”principlebased”-broadframework;U.SGAAP-”rules-based”approachthatgivesspecificguidanceU.SGAAPismovingtowards“objectiveoriented”-blendstheothertwoapproaches.MeasurementAnothertradeoffisproperlyvaluingbalancesheetelementsandproperlyvaluingincomestatementelements“asset-liability”approachislargelyused,focusingonbalancesheetvaluation“revenue-expense”approachplacesmoresignificanceontheincomestatementFinancialReportingStandardBaUnderstandingtheIncomeStatementRevenues8,234,433.00Costofgoodsold(5,653,421.00)Grossprofit2,581,012.00Sellingexpense(876,123.00)General&administrativeexpense(489,765.00)Depreciationexpense(109,882.00)Operatingprofit1,105,242.00Interestexpense(38,224.00)PretaxIncome1,067,018.00Incometaxexpense(213,403.60)NetIncome853,614.40Presentationformats:AsimpleIncomestatementispresentedasfollowsUnderstandingtheIncomeStateUnderstandingtheIncomeStatementRevenuerecognitioncriteria:EvidenceofanarrangementbetweenbuyerandsellerProducthasbeendeliveredandservicehasbeenrendered.PriceisdeterminedordeterminableThesellerisreasonablysureofcollectingmoney.Whatifcashisreceivedbeforerevenuerecognitioniscomplete?ThefirmshouldreportitasunearnedrevenueUnderstandingtheIncomeStateUnderstandingtheIncomeStatementRevenuerecognitionapplications:Fiverevenuerecognitionalternativesrecognizetherevenuesatdifferentpointsoftheproduction/salescycle.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementLong-termcontracts-CharacteristicsLong-termprojectshaveacontractthatwouldbelegallyenforceableagainstthebuyer.RevenueisrecognizedpriortotimeofsalePercentage-of-Completionvs.CompletedContractsPercentage-of-CompletionCompletedContractsRevenueandexpensearerecognizedeachperiodinproportiontotheworkcompletedRevenueandexpensearenotrecognizeduntiltheentireprojectiscompleted.isappropriateiftheproject'scostandrevenuecanbereliablyestimatedisusedwhentheoutcomeofaprojectcannotbereliablymeasuredortheprojectisshort-termUnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementAmountbilling6002002001000Cashreceived4004002001000UnderstandingtheIncomeStateUnderstandingtheIncomeStatementPOCcomparedtoCC(MoreaggressivethanCC)(Smootherearningsandbettermatchingofrevenueandexpenses)(moresubjectiveasitinvolvescostestimates)TotalassetsHigherLiabilitiesLowerShareholder’sequityHigherNetIncomeHigherCashFlowsSameLiabilitiestoEquityRatioLowerAssetturnover(AT)HigherUnderstandingtheIncomeStateUnderstandingtheIncomeStatementSalesrecognitionInstallmentsandCostrecoverymethods:Postponerevenuerecognitiontopointsofcashcollection,resultingadelayedrecognitionofprofits.Costrecoverymethodsdelayedrecognitionofprofitsevenfurther,sinceprofitisrecognizedonlywhencashcollectedexceedscostsincurred.InstallmentsCostrecoveryIsappropriatedifthecollectabilitycannotbereasonablyestimated.IsappropriatedifthecollectabilityishighlyuncertainProfitisrecognizedascashiscollected.(Realestatecompanyoftenusethismethod.)ProfitisrecognizedonlywhencashcollectedexceedscostsincurredUnderstandingtheIncomeStateUnderstandingtheIncomeStatementScenario1:thecustomerisaregularandhasgoodcredithistoryScenario2:thecustomerisanewcustomerandApollocannotreasonablyestimatethelikelihoodofcollectingtheproceeds.Scenario3:thecustomerisanewcustomerwithpoorcredithistory.SalesrecognitionExample-InstallmentsalesandcostrecoveryUnderstandingtheIncomeStateUnderstandingtheIncomeStatementOtherissuesonrevenuerecognition1Howrevenueisrecognizedinabartertransactions:USGAAP:revenuefromabartertransactioncanberecognizedatfairvalueonlyifThefirmhashistoricallyreceivedcashpaymentsforsuchgoods,Thishistoricalexperiencecanbeusedtodeterminefairvalue.IFRS:revenuefrombartertransactionmustbebasedonthefairvalueofrevenuefromsimilarnon-bartertransactionswithunrelatedparties.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementOtherissuesonrevenuerecognition2GrevenuereportingExample:atravelagentarrangesaticketforacustomer.Theticketpriceis10,000andthetravelagentreceivesa1,000commission.Shouldtheagentreport1,000ofrevenueor11,000ofrevenue?ThefirmmustmeetthefollowingstandardstousegrossrevenuereportingunderUSGAAPBetheprimaryobligorunderthecontract. Beartheinventoryriskandcreditrisk. Beabletochooseitssupplier Havereasonablelatitudetoestablishtheprice.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementOtherissuesonrevenuerecognition3ImplicationforfinancialstatementanalysisFirmcanrecognizerevenuebeforedelivery,atthetimeofdeliveryandafterdelivery.Investorsmustconsiderhowconservativearethefirm’srevenuerecognitionpolicies(thesoonerthemoreaggressive),andtheextenttowhichthefirm’spoliciesrelyonjudgmentandestimates.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementExpenseRecognitionBasisforexpenserecognition-thematchingprinciple(1)Goodexample:COGS.Ifdonotabidematchingprinciple,thentheCOGSisdistorted,therebyboostinggrossprofit.(2)Periodcosts(e.g.,administrativecosts),cannotdirectlytiedtorevenuegeneration.Theyareexpensedintheperiodincurred.(3)Others:Depreciationcost(applymatchingprinciple)Baddebtexpense(applymatchingprinciple) Warrantyexpense(applymatchingprinciple)UnderstandingtheIncomeStateUnderstandingtheIncomeStatementExpenseRecognition-ImplicationforFinancialAnalystAnalystshouldknowexpenserecognitionrequiresanumberofestimates,henceitispossibleforfirmstodelayoracceleratetherecognitionofexpense.Considerthereasonforachangeinanexpenseestimate.Compareafirm’sestimatetopeerfirm.CheckfootnotesandMD&Aformoreinformationonaccountingpoliciesandestimates.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementExpenserecognitionexample-applyonthefollowingaccounts:Methodsofdepreciation;AccountingmethodforInventory,Methodofamortizingintangibles.Depreciation-StraightLineoraccelerateddepreciationmethodInventory-Specificidentificationmethod,FIFO,LIFO,WeightedaverageIntangibleassets-Straightlineamortizationiscalculatedexactlyasstraight-linedepreciation.ImpairmentisconductedatleastannuallyUnderstandingtheIncomeStateUnderstandingtheIncomeStatementAcomplexincomestatementispresentedasfollowsUnderstandingtheIncomeStateUnderstandingtheIncomeStatementNon-recurringitems-nottheresultsofafirm’snormalbusinessoperations.(1)Discontinuedoperations

managementhasdecidedtodisposeof,buteitherhasnotyetdoneso,orhasdisposedofincurrentyearTobeaccountedforasadiscontinuedoperations,thebusiness(assets,operations,andinvestingandfinancingactivities)mustbephysicallyandoperationallydistinctfromtherestofthefirm.Theincomeandlossduringmeasurementdateandphaseoutperiodisreportedintheincomestatement,netoftax,afternetincomefromcontinuingoperations.Analystreview:providefuturecashflowofthefirm.(2)ExtraordinaryitemsMaterialtransactionthatisbothunusualinnatureandinfrequentinoccurrence.Reportedseparatelyinincomestatement,netoftax,afternetincomefromcontinuingoperationsIncludingthefollowingLossesfromanexpropriationofassetsGainsorlossesfromearlyretirementofdebtsUninsuredlossesfromnaturaldisastersAnalystreview:somefirmsareaccidentprone.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementNon-recurringitems-nottheresultsofafirm’snormalbusinessoperations.(3)ChangesinAccountingstandards.referstochangesfromoneaccountingmethodtoanother.E.g.,revenuerecognitionchangefromPOCtoCC;InventoryaccountingmethodchangesfromFIFOtoLIFO,etc.Changesinaccountingestimates:managementchangesitsjudgmentduetonewinformation.E.g.,changethelifeoftheassets.Changesinaccountingstandardsvs.changesinaccountingestimates:spectiveapplication.Correctionofaccountingerror:Prior-periodadjustmentNoneoftheaboveaffectcashflows.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementOtherItem(4)UnusualorInfrequentItem:UnusualinnatureORinfrequentinoccurrence.e.g.Gainorlossfromsalesofassetsorpartofabusiness.e.g.Impairment,write-offs,write-downs,andrestructuringcosts.U/Iitemaffectnetincomefromcontinuingoperations,andarereportedbeforetax.(5)OtherIncomeInvestmentincome,dividendincome,etc.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementEarningpershare(netincomeearnedbyeachcommonstock)EPSreportingrequirementsdependonafirm’scapitalstructure.Ifthefirmdoesnotcontainpotentiallydilutivesecurities,thecapitalstructureissimple.Ifthefirmdoescontainpotentiallydilutivesecurities,thecapitalstructureiscomplex.FirmswithsimplecapitalstructureonlyneedtoreportbasicEPSFirmswithcomplexcapitalstructureneedtoreportbothbasicanddilutiveEPSPotentiallydilutivesecuritiesreferstowarrants,stockoptions,convertiblebondsorconvertiblepreferredstock,thatuponexerciseorconversionmaydecreaseEPSUnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementReportingbasicEPSisrequiredinallsituations,regardlessofwhetherthefirmhasasimpleorcomplexcapitalstructure.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementExample:calculateweightedaveragecommonsharesoutstandingandbasicEPSUnderstandingtheIncomeStateUnderstandingtheIncomeStatementExample:calculateweightedaveragecommonsharesoutstandingandbasicEPSUnderstandingtheIncomeStateUnderstandingtheIncomeStatementStockDividendandStockSplits:NumberofsharesunchangedValueofsharesisunchanged.A100%stockdividendanda2to1stocksplithasthesameimpactonEPSTheeffectofastockdividend/splitisappliedretroactivelytotheentireperiodpriortothestockdividend/split.UnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementABNInc,hasnetincome50M;paidPreferredstockdividend5M,andthenumberofPreferredstockshares1.5M.OnDec31,1997ABNIncoutstandcommonshares2m,OnMar31,1998paid10%stockdividend;OnApr1,issued1mcommonstock;OnJune1,splitstock2for1;OnSep1,issued0.1mnewcommonshares;OnNov1,repurchased1mcommonshares;weightedaveragenumberofoutstandingshares?BasicEPS?UnderstandingtheIncomeStateUnderstandingtheIncomeStatement

DilutedEPS

showsthemaximumpotentialadverseeffectonEPSifdilutivesecuritiesareconvertedtocommonstock.ThecalculationofdilutedEPSdoesnotconsideranti-dilutivesecurities.Weneedtocheckeachpotentiallydilutivesecurityindividuallytoseewhetheritisdilutiveoranti-dilutive. CalculationofdilutedEPS-fourstepsIdentifydilutivesecurities:[C-B;C-PS;O;W]ComputebasicEPSDeterminetheeffectofeachsecuritiesonEPStoseeifitisdilutiveoranti-dilutiveUseBasicEPSanddilutivesecuritiestocomputedilutiveEPSUnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementMethodsNumeratoradjustmentIncreasedbyDenominatorAdjustmentIncreasedbyConvertiblebondsIf-convertedtheamountofaftertaxbond’sinterestParvalueoftheconvertiblebond/conversionpriceConvertiblePreferredstockIf-convertedconvertiblepreferredstock’sdividendNo.ofConvertiblepreferredstockoutstandingxconversionrateUnderstandingtheIncomeStateUnderstandingtheIncomeStatementMethodsNumeratoradjustmentIncreasedbyDenominatorAdjustmentIncreasedbyOptionsWarrantsTreasurystockmethodDoesnotchange(exerciseofwarrantsoroptionsdoesnotaffecttheincomeavailabletocommonstockholders)NetchangeinNo.ofsharesoutstanding=No.ofsharesissuedtooption/warrantsholders-No.ofsharesacquiredfrommarket(N*AMP-N*EP)/AMP=N-(N*EP/AMP)UnderstandingtheIncomeStateUnderstandingtheIncomeStatementC/BC-PSUnderstandingtheIncomeStateUnderstandingtheIncomeStatementONo.ofsharescreatedfromexerciseoftheoptions

1000x2-1000x2x30/50=800EquivalentNo.ofcommonshares800x12/12=800WNo.ofsharescreatedfromexerciseofthewarrants2000x3-2000x3x60/50=-1200EquivalentNo.ofcommonshares-1200x6/12=-600UnderstandingtheIncomeStateUnderstandingtheIncomeStatementUnderstandingtheIncomeStateUnderstandingtheIncomeStatementItemsthatareexcludedfromtheincomestatementbutaffectequity.IssuestockandreacquirestockDividendspaidOthercomprehensiveincomeForeigncurrencytranslationandlossAdjustmentsforminimumpensionliabilityUnrealizedgainsandlossesfromcashflowhedgingderivatives.Unrealizedgainsandlossesfromavailableforsecurities.UnderstandingtheIncomeStateUnderstandingthebalancesheetThevariousformatofbalancesheetpresentationisasfollows:Accountformat:left-rightformatReportformat:onecolumnformatClassifiedbalancesheetgroup:cu