Contents

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Chapter 13 Investments and Fair Statement of Cash Flows—The Indirect

Method 646
Value Accounting 583 Retained Earnings 647
Adjustments to Net Income 647
Why Companies Invest 584
Investing Cash in Current Operations 584 Business Connection: Cash Crunch! 650
Investing Cash in Temporary Investments 585 Integrity, Objectivity, and Ethics in Business: Credit
Investing Cash in Long-Term Investments 585
Policy and Cash Flow 651
Accounting for Debt Investments 585 Dividends 652
Purchase of Bonds 586 Common Stock 653
Interest Revenue 586 Bonds Payable 653
Sale of Bonds 587 Building 654
Land 654
Accounting for Equity Investments 588 Preparing the Statement of Cash Flows 655
Less Than 20% Ownership 588
Between 20%–50% Ownership 590 Statement of Cash Flows—The Direct
More Than 50% Ownership 592 Method 656
Cash Received from Customers 656
Business Connection: Apple’s Entrance to Cash Payments for Merchandise 657
Streaming Music 593 Cash Payments for Operating Expenses 658
Valuing and Reporting Investments 593 Gain on Sale of Land 658
Trading Securities 593 Interest Expense 658
Cash Payments for Income Taxes 659
Integrity, Objectivity, and Ethics in Business: Loan Reporting Cash Flows from Operating Activities—
Loss Woes 595 Direct Method 659
Available-for-Sale Securities 595
Held-to-Maturity Securities 597
International Connection: IFRS for Statement of
Summary 597 Cash Flows 660

Business Connection: Warren Buffett: The Sage of Financial Analysis and Interpretation: Free
Omaha 599 Cash Flow 661

Fair Value Accounting 600 Appendix: Spreadsheet (Work Sheet) for

Trend to Fair Value Accounting 600 Statement of Cash Flows—The Indirect
Effect of Fair Value Accounting on the Financial Method 662
Statements 601 Analyzing Accounts 663
Retained Earnings 664
Financial Analysis and Interpretation: Dividend Other Accounts 664
Yield 601 Preparing the Statement of Cash Flows 665
Appendix: Comprehensive Income 602
Comprehensive Problem 4 625 Chapter 15 Financial Statement
Financial Statements for Mornin’ Joe 629 Analysis 697
Mornin’ Joe International 632 Basic Analytical Methods 698
Horizontal Analysis 698
Chapter 14 Statement of Vertical Analysis 701
Common-Sized Statements 702
Cash Flows 641 Other Analytical Measures 703

Reporting Cash Flows 642 Liquidity and Solvency Analysis 703

Cash Flows from Operating Activities 643
Cash Flows from Investing Activities 644
Cash Flows from Financing Activities 645
Noncash Investing and Financing Activities 645
No Cash Flow per Share 645
Current Position Analysis 704
Accounts Receivable Analysis 706
Inventory Analysis 707
Ratio of Fixed Assets to Long-Term Liabilities 709
Ratio of Liabilities to Stockholders’ Equity 709
Number of Times Interest Charges Are Earned 710