We're now going to have a look at the financial statements of ABB, a Swedish-Swiss, multinational electrical engineering corporation. We're going to do this to explore key issues in the industrials income statement and balance sheet. Sales will be split into OE, for example, equipment sales and AM, for example, servicing that equipment. Understanding the split and where the company sits in long cycle short cycle is important. The backlog can be used to help analyze this as can book-to-bill. Costs may be linked through sales through contract accounting.

If the product is long cycle, it may be running cost-to-cost systems, which release revenue slowly as costs are incurred. R&D will be significant, and understanding if and how it's capitalized is important for comparability in the balance sheet. Working capital will now extend from regular receivables, inventory, and payables to include contract assets and liabilities. These may be highly volatile due to differences in cost to cost systems and cashflow. This will require in-depth knowledge of the company contract practices to really understand. Assets may include catalyzed R&D, which would create much higher intangibles in the company where this is allowed. Pensions and OPEBs are often significant and can create debt-likes in valuation. We'd really need to understand the footnotes as the face of the balance sheet with net out all of the surpluses and deficits and create an inaccurate view.