The document discusses analyzing a firm's financial statements to capture operational and key risk factors. It notes that the income statement reveals obvious risk factors, while less obvious ones are found in footnotes. It also discusses analyzing changes in depreciation, amortization, and deferral assumptions on the income statement, as well as recurring and pro-forma expenses. For the balance sheet, it suggests analyzing allowance trends and balances relative to sales. The document concludes by mentioning proposed adjustments should be shown in an exhibit with calculations.

1. 1.How are the firm’s operational and key risk factors captured
in their financial statements? Income statement will reveal
obvious ones, but remember to look at places that are less
obvious such as the footnotes
2.Income Statement Analysis
changes:
depreciation/amortization/deferral assumptions
-recurring” and cut-from-pro-forma
expenses
3.Balance Sheet Analysis
This neglected financial statement doesn’t get the press as
much.
relative to sales, allowance, trends)

2. 4.Proposed Adjustments if any (show in an exhibit the
calculations for the adjustments.)