Introduction to Financial Statements

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


Case Study

• A review of the financial statements of two FTSE 350 companies
• Evaluating the significance of business sector when interpreting corporate performance
• Capturing commercial transactions and reflecting them within published accounts

Exercises

• Calculate and comment on key performance ratios
• Calculating depreciation
• Comparison of depreciated historic cost with fair value for non-current assets
• Calculating the working capital cycle
• Preparation of a statement of cash flows

Other Extras

• Certificate of attendance

Level: Introductory


Synopsis:
The only reason people say accounts are boring is because they don't understand them! Remember that you cannot truly appreciate how a real company works without deciphering its financial statements. By using real-life accounts to illustrate concepts, the course not only explains how a set of financial statements is put together but also provides a beginner's guide to the analysis and interpretation of them.


At the end of the course participants will be able to: Inspect and understand a series of real-life company accounts . Explain some of the recent accounting scandals and why problems were not identified sooner . Demystify the language of accounts and break down barriers of understanding . Compute and interpret key financial ratios . Be aware of creative accounting techniques and how they may be identified . Identify the importance of accounting policies and their impact on the financial statements . Examine the annual report of a FTSE 100 company and explain the uses of non-financial information . Explain the format and use of the three primary financial statements .


Prerequisites:
None


Suitable For:
New research staff responsible for analysing financial information. This course is suitable for anyone wishing to understand the format and content of company accounts and how they may be interpreted e.g. individuals working in sales.


Primary financial statements

• Balance sheet (statement of financial position)
• Profit and loss account (statement of income)
• Cash flow statement

Profit and loss account (statement of income)

• Reporting financial performance
• Segmental reporting
• Cost of sales and gross profit margins
• Operating costs and operating profit margins

Earnings per share

• Definition
• Calculating basic EPS
• Diluted EPS

Return on Capital Employed (ROCE)

• DuPont breakdown

Non-current assets

• Types of fixed assets
• Types of tangible fixed assets
• Long-lived assets: capitalisation decision
• Cost vs. valuation
• Depreciation

Accounting for other intangibles

• Research and development expenditure
• Accounting for goodwill

Working capital

• Types of current assets and current liabilities
• The working capital cycle
• Working capital comparison - real world examples

Analysis of working capital - liquidity ratios

• Accounting for inventory & costing methods
• Lower of cost and net realisable value
• LIFO vs. FIFO and other inventory cost flow methods - effects on working capital, income and cash flows

Statement of cash flows

• Definition of cash
• Cash flow vs. accounting profit
• Example statement of cash flows