Financial Statement Analysis

In addition to your class tuition and study materials, you will receive the following:


Case Study

• Participants are provided with 2 sets of real-life company accounts of FTSE 100 companies and asked to compute relevant ratios and analysis on these financial statements
• Using SPVs for off balance sheet finance purposes, Enron and others

Exercises

• Calculation & interpretation of investor ratios of a FTSE 100 company
• Calculation & interpretation of the working capital cycle
• Identifying finance and operating leases and computing the impact of each on financial performance and position
• Preparing a statement of cash flows
• Applying the fundamentals of acquisition accounting

Other Extras

• Certificate of attendance

Level: Intermediate


Synopsis:
Preparing a set of accounts is one thing, but analysis is another ball game entirely. Learn how to use the analytical techniques employed by investment professionals. Discover the tricks of the trade and what to look out for when performing financial statements analysis.


At the end of the course participants will be able to: Explore how provision accounting is used to manipulate profit . Examine the analysis of 'off balance sheet finance' . Illustrate how group accounts are prepared & interpreted and explain the nature of associate companies . Examine the nature of groups and how they are accounted for . Compute and analyse free cash flow and the cash-conversion cycle . Identify the importance of cash to a business and explain how to interpret a formal statement of cash flows . Examine the methods employed to analyse profit and the policies adopted for earnings recognition purposes . Identify the importance of sources of capital and how financial structure is measured and analysed . Compute and interpret the working capital cycle . Explain the analytic issues in relation to fixed assets: tangibles and intangibles . Re-examine the rules governing the preparation of financial statements . Recap on the three primary statements, the fundamental accounting concepts and the accounting equation .


Prerequisites:
None


Suitable For:
Individuals who work with financial statements, and therefore need to be able to evaluate and interpret the information they contain.


The primary statements: recap

• Balance sheet (statement of financial position)
• Profit and loss account (statement of income)
• Statement of cash flows
• Fundamental accounting concepts

Basic investor ratios

• Earnings per share and price earnings
• Dividend yield and cover
• Return on equity

Non-current assets

• Cost vs. valuation
• Depreciation and amortisation
• Accounting for intangibles including goodwill
• Fair values in acquisition accounting
• Investment properties
• Research and development expenditure
• The capitalisation decision

Provisions

• Using provision accounting to smooth profits
• 'Big-bath' provisions

Financial structure

• Share capital vs. reserves vs. debentures vs. loan stock
• The impact of gearing - interest cover
• Accounting for complex capital instruments
• Degree of financial leverage vs. degree of operating leverage

Off-balance sheet finance

• Economic substance vs. legal form
• Sale and repurchasing agreements
• Debt factoring
• Consignment stock
• Leased assets and sale and leaseback

Financial performance

• Segmental reporting
• Operating costs and operating profit margins
• Understanding the statement of other comprehensive income
• The statement of changes in equity

Group financial statements

• The single entity concept
• Understanding the derivation of: purchased goodwill, non-controlling interests
• The mechanics of acquisition accounting
• Subsidiaries vs. associates