SPECIALS
Review: Reading Between The Lines Of Company Accounts

By Maynard Paton (TMFMayn)
August 8, 2001

Book Review: Reading Between The Lines Of Company Accounts, by Stephen Bloomfield

In terms of both content and price, Stephen Bloomfield's book sits conveniently between the Motley Fool's introductory UK Investment Workbook and the bible for accounting analysis, Holmes and Sugden's Interpreting Company Reports and Accounts. For just £10, Bloomfield offers a straightforward path for those wishing to develop a basic knowledge of accounting further.

Despite what the title may imply, this is no Accounting for Growth, the now legendary book that first highlighted the creative accounting that public companies sometimes adopt. Instead, Reading Between The Lines mainly covers the basic concepts of a company's accounts and the various terms and numbers private investors are most likely to encounter. In this respect, the book does a solid job in discussing all the issues novices find most troublesome.

At the outset, Bloomfield (quite rightly) states that the book is a "guide to understanding accounts" and that successful accounts analysis "takes a lot of practice". In terms of the definitions and technical explanations, clear and distinct paragraphs, helped by occasional emboldened text, make the book a useful reference work. Indeed, Bloomfield clears up one or two of those age-old accounting questions, such as explaining the benefit of a bonus issue over a share split and what the parent company (as opposed to the group) balance sheet can be used for.

Where Bloomfield perhaps under-delivers is in the last third of the book. The ratios and measures used to interpret the accounts are described in the text, rather than presented in a clear, formula format. Given that there's no final ratio roundup either, some of the more useful measures may not be easy to relocate when readers begin on their first set of accounts.

What's more, there are also a few notable absences, including the interest cover measure and the differences between the various earnings per share figures most companies publish. A further niggle is the lack of example calculations. Illustrative ratios (especially when taken from genuine annual reports) are the best help for beginners when trying their own hand at the number crunching.

Overall, Bloomfield does a sound job in explaining the important accounting terms and measures in a readable format. His book is certainly a good choice for those wanting a cheap, decent review of what to look for when reading a set of accounts, while not getting too bogged down in the technicalities.

Ratings (out of 5)

Content: 4
Readability: 4
Foolishness: 4