Martin Fridson and Fernando Alvarez’s Financial Statement Analysis, Fourth Edition revisits understanding financial statements with updates. Financial statements are a mirror to the soul of a business. Therefore analysing and understanding financial statements are very important when we want to make business decisions about them. If that decision is about an impending merger and acquisition or evaluating their stock, financial statement analysis is critical.

In the backdrop of the financial crisis of 2008-2009 , we now know that biased and misleading financial statements are not impossible. The book aims at incorporating this and helping learners assess financial statements in a more robust manner.

Financial Statement Analysis, Fourth Edition has several real-life case studies and expert voices that will help you look beneath the numbers and ascertain a realistic picture about the business.

The book is split into the following four parts:

• Reading between the lines
• The Basic Financial Statements
• A closer Look at Profits
• Forecasts and Security Analysis

The authors in their preface to the book explain their objectives for the four parts.

“In Part One, “Reading between the lines”, we show that financial statements do not simply represent unbiased portraits of corporations’ financial performance and explain why. The section explains the complex motivations of issuing firms and their managers. We also study the distortions produced by the organizational context in which the analyst operates.

Part Two, “The Basic Financial Statements”, takes a hard look at the information disclosed in the balance sheet, income statement and statement of cash flows. Under close scrutiny, terms such as value and income begin to look muddier than they appear when considered in the abstract. Even cash flow, a concept thought to convey redemptive clarification, is vulnerable to stratagems designed to manipulate the perceptions of investors and creditors.