Bonds, equity, investments, and the indirect method decoded.
Complete the Libby curriculum: long-term debt instruments, shareholders' equity structure, inter-corporate investments, and the full cash flow statement — from the indirect method through ratio analysis and DuPont decomposition.
Financial Accounting by Libby / Libby / Short + Accounting Made Simple by Mike Piper
Bond mechanics from the issuer's perspective: face value, coupon, maturity, and the times-interest-earned ratio as the first coverage test for debt safety.
When market rates diverge from coupon rates, bonds trade away from par. The effective interest method: how carrying value and interest expense change every period.
Gain or loss on early extinguishment, how zero-coupon bonds accrete to face value, and the debt-to-equity ratio as the leverage measure tied directly to the balance sheet.
The anatomy of the equity section: authorized vs. issued vs. outstanding shares, par value, additional paid-in capital, and what each tells you about the company's capitalization history.
How buybacks reduce the share count and hit the equity section, why treasury stock is a contra-equity account, and the accounting for dividends and stock splits.
Why diluted EPS is almost always the number that matters. Options, warrants, convertibles: the treasury stock method and why SBC is quietly diluting shareholders every quarter.
Three accounting treatments for three ownership levels: mark-to-market for trading securities, OCI for available-for-sale, and the equity method when you have significant influence.
When one company controls another, the financials are consolidated. Libby's Washington Post case: how minority interest appears, and what consolidation hides and reveals.
Net income is the starting point; then every non-cash item and working capital change is added or subtracted. The indirect method step-by-step — the foundation of FCF analysis.
Capex, acquisitions, debt issuance, equity raises, dividends, buybacks: the investing and financing sections as a window into management's capital allocation priorities.
Operating cash flow minus capex: the definition, why it's more reliable than net income, and how to find it directly in a 10-K cash flow statement.
Current ratio, quick ratio, receivables turnover, inventory turnover, and asset turnover: the operational efficiency ratios that connect balance sheet items to income statement performance.
Return on assets, return on equity, net profit margin, and the debt ratios: how profitability and leverage interact — and why ROE without context can be deeply misleading.
Decompose return on equity into its three drivers. The same 30% ROE can mean completely different things — DuPont tells you whether it comes from margins, efficiency, or leverage.
Fifteen questions covering bonds, equity instruments, investments, the indirect method, free cash flow, and ratio analysis — grounded in Libby Ch10–14.