Accounting process in security analysis

Analyst see only financial statement  Need to understand accruals, adjustment, management assumption Contained in the footnotes → crucial to review Contained in Management’s Discussion and

Relationship between BS, IS, CF

Balance sheet Financial position at the end of the current accounting period Income statement, cash flow statement, statement of owner’s equity  Change that occurred during

Accounting equation

Basic accounting equation (16) Assets = liabilities + owner’s equity  Expanded accounting equation (17) Assets = liabilities + contributed capital + ending retained earnings =