Charles W Mulford

The Financial Numbers Game- Detecting Creative Accounting Practices

3 stars (Too basic and the title is really a misnomer) - Given the promise of the book's title, I was disappointed. "The Financial Numbers Game" is really alomst a misnomer as the book spends many pages on explanations of basic accounting principles - much like an introductory textbook - and then discussed some of the more obvious creative accounting practices. What you do get from this textbook is an overall solid overview of basic GAAP, with a large number of real world examples (which is good). What you don't get is real insight into some of the more interesting ways companies use to manage earnings and their balance sheet. For example, I could not find anything on special purpose entities, off balance sheet financing, dirty surplus accounting, a meaningful discussion of EBITDA beyond the basics, and anything beyond the obvious, really. I also thought the discussion of receivable days was problematic (chapter eight). This may go into too much detail but the authors calculate this ratio based on the ending balance of accounts receivable rather than some average (eg, beginning and ending balance if nothing else is at hand). This actually distorts the ratio and results in an incorrect analysis of the development of receivables where they change between periods. This is not good for two academics. As previous reviewers pointed out, the book has too many repetitions which a good editor should have caught. I like the solid accounting overview and the multitude of examples the text provides and that merits three stars. If you are an MBA student who is interested in an accounting refresher, this may be a book for you. If on the other hand you are a professional analyst or investor - what the authors call serious readers of financial statements in their preface - then this will disappoint you. 5 stars (Highly Recommended!) - A special note in the preface of this book explains that it went to press just as the Enron story was beginning to break. Three of its chapters ...
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