| How To Use These Materials
We’ve designed these cases to be used in conjunction with an introductory, intermediate, or financial
statement analysis textbook. The order in which material is presented by your instructor does not affect
the relevance of the cases. Each case stands alone and while some cases naturally precede others, there is
no prescribed order.
As you use these materials, notice two main themes—earnings persistence and the quality of
earnings. The first third of the cases in the book relate to the framework of financial reporting. In these
cases you are acquiring skills in basic financial statement preparation, and in understanding how
financial statements aid in the investment decision process. In achieving the latter, we emphasize how
financial statements classify items and how such classifications are important in the prediction of the
nature, uncertainty, and timing of future cash flows. Thus, we introduce the notion of earnings persistence
and how it affects firm valuation. The remainder of the cases explores the accounting issues for the major
financial statement line items. We place particular emphasis on the latitude and judgment management
has in arriving at the reported numbers and the economic consequences of their choices. This introduces
the notion of the quality of earnings. The cases are designed to help you acquire the skills necessary to
identify quality of earnings issues and learn how to deal with them (for example, by restating the
financials under different assumptions or accounting methods).
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