Advanced Financial Statements Analysis
Overview
This course brings together the key elements of financial statement analysis. It will enable participants to ask the right questions, see the real risks facing businesses and investors, feel more confident in their ability to comment on business activities and performance, and analyze financial health for management. These skills and the required technical knowledge will be practiced throughout the course using interactive examples and case studies, putting theory and technique into context.
Objectives
By the end of the course, participants will be able to: Explain the impact of accounting treatments and methodologies on financial statements Analyze the industry using Porter’s five forces model Apply financial ratios analysis in Excel and report recommendations Assess the quality of financial reports and reported earnings and cash flows Forecast financial statements based on the analysis of the historical performance of a company
Audience
accounting managers, senior accountants, finance directors, finance managers, financial analysts, financial controllers, financial accounts managers, heads of finance departments, credit controllers, credit risk analysts, bankers, and relationship managers.
Methodology
Advanced Financial Statements Analysis training course will be run along with workshop principles, with formal presentations that include practical illustrations and relevant worked examples used to apply the financial tools and techniques in a real-world environment. Interactive team-based exercises and case studies reinforce the application of each of the learning ideas and topics enclosed. These are reinforced with the help and advice of the Instructor and his extensive real experience and knowledge of financial statements and analysis. Group discussion will promote the exchange of experiences and ideas. Difficult mathematical concepts are minimised wherever possible and handled in a visual way that is easy to understand – our aim is for this to be an enjoyable learning experience.
Outline
Day 1: Introduction to Advanced Financial Analysis The importance and objectives of financial data analysis. Users of financial information and their needs. Sources of financial information with emphasis on published annual reports. Purpose, structure, and contents of annual reports and accounts. Creative accounting, financial scandals, and the agency problem. Corporate governance, sustainability, ethics, and CSR reporting. The three main financial statements: Income Statement. Balance Sheet. Statement of Cash Flows. Day 2: Analysing the Annual Report and Accounts Using ratio and other analyses to assess financial position and performance. Profitability and Cost-Volume-Profit (CVP) Analysis. Efficiency and working capital management. Liquidity and short-term solvency. Investment and growth analysis. Financial structure and long-term solvency. Practical ratio analysis using Excel. Trend analysis with horizontal and vertical common-size techniques for comparability. Day 3: Analytical Tools, Cash Flow vs. Profit, and Forecasting The DuPont system of ratio analysis and ratio pyramids. Segmental and value-added analysis of the annual report. Fundamental statistical tools and graphical representation. Using statistical techniques to analyze and forecast financial data. Impact of alternative asset valuation methods on the balance sheet and profitability. Cash flow vs. profit – the most reliable measure of performance. Working capital and the operating cash flow cycle. Direct and indirect cash flow analysis and preparing cash flow forecasts. Day 4: Financing, Capital Investment, and Business Valuation Balance sheet analysis: identifying long-term debt, equity, and short-term financing. Cost of capital models: Cost of equity (Dividend Growth Model & CAPM). Cost of debt. Weighted Average Cost of Capital (WACC). Optimal capital structure models to minimize WACC. Future value, present value, and discounted cash flow (DCF). Investment appraisal tools: NPV, IRR, MIRR, EAC. The purpose of business valuations. Business valuation methods and models. Day 5: Analysing and Predicting Corporate Failure, Risk and Uncertainty Predicting corporate distress and failure: the Altman Z-score model. Business risk and uncertainty in financial decision-making. Risk analysis techniques: expected values, standard deviation, coefficient of variation. Sensitivity analysis, simulation, scenario planning, and break-even analysis. Analytical tools for risk management. Types of risk: systematic, unsystematic, business risk, and financial risk. Financial risks: interest rate exposure and foreign exchange exposure. Mitigating risk through insurance, hedging, and derivatives.