Course Objectives
By the end of the course, participants will be able to:
- Apply the framework of financial statements analysis
- Use ratio and financial analysis
- Interpret company financials and industry position
- Appraise the process of company evaluation and analysis
- Analyze real-life financial statements from companies traded on the world and ‘GCC’ stock exchanges
- Prepare financial analysis template models
Course Outline
Required components of financial statement analysis
- Role of financial reporting and analysis
- Core financial statements and the importance of the annual report
- The important role of notes and supplementary information
- Objectives of financial statements audit
- Types of audits
- Financial statement analysis framework
- The accounting cycle
- Financial reporting mechanics
- Relationship, elements and classification of financial statements
Financial reporting standards
- Importance of reporting standards in security analysis and valuation
- The standards setting bodies
- International Financial Reporting Standards (IFRS) versus Generally Accepted Accounting Principles (GAAP)
An inside look at financial statements
- Income statement components
- The three important components of income statements
- Revenue and expense recognition
- Balance sheet components
- Measurement and classification
- The five important components of a balance sheet
- Statement of changes in owners equity
- Cash flow statement:
- Operating, investing, and financing activities
- Direct versus indirect methods in cash flow preparation
- Reading and interpreting cash flow
- The cash rich standard
Mechanisms of financial analysis techniques
- Vertical analysis and strategy: balance sheet and income statement approaches
- Horizontal, trend analysis and growth
- Liquidity analysis:
- Current, quick, and cash ratios, defensive interval and cash conversion cycle
- Asset management and activity ratios:
- Total and fixed assets turnover
- Solvency analysis:
- Debt, equity, and times interest earned ratios
- Profitability analysis:
- Profit margin, gross margin, return on assets, return on equity
- Market and valuation:
- Price earnings and earnings-per-share ratios
- DuPont analysis: the three-step and five-step models
- Limitation of ratio analysis
Financial statement analysis: applications and presentations
- Evaluating a company’s past performance
- Comprehensive real life analysis of publicly traded companies