Fundamentals of Corporate Financial Statement Analysis

This two-day course is designed to explain how financial measures of corporate performance are calculated and used to assess credit worthiness of a business. The course covers the basics of financial statement analysis and enables participants to confidently use financial terminology. This is an introductory level workshop designed for users of financial reports and accounts who have no prior or limited knowledge of corporate financial information; it focuses on the numbers behind the risks rather than the risks themselves.

Key Learning Outcomes:

• How a company’s business and financing activities are reflected in its financial statements
• The components of financial statements: Balance sheet, profit and loss and cash flow and key notes to the accounts
• The distinction between cash flow and profits
• How to measure operating, investing and financial performance using appropriate ratios and cash flow tools

COURSE CONTENT

Day One

Introduction

Validation of the need for financial analysis and a realization of dependency on external accountant reports.

• Financial analysis as a fundamental tool of credit risk analysis
• Financial reporting and accounting standards

Core Financial Statements

Methodological assessment of the key financial accounts and the way they complement each other.

• Overview of the types and presentation format of financial statements
• Key accounting principles; consolidation and company accounts
• IFRS or US GAAP presentation of company financial statements focusing on the key statements needed for financial analysis:
  • Statement of financial position
  • Statement of comprehensive income
• Application: Create a set of accounts by reporting step-by-step actions
  • Statement of cash flow
• Application: Derive a simple cash flow statement
  • Statement of changes in equity
  • Notes to the accounts
  • Accountants opinion
• Application: Illustration case study

Financial Analysis

Using information from the financial statements to assess financial performance and financial leverage of a corporate. Introduction of key financial ratios which can be used in the assessment.

Business and Operating Appraisal

Using information from the financial statements to assess financial performance and financial leverage of a corporate. Introduction of key financial ratios which can be used in the assessment.

• Accounting for revenue and expenses
• Capitalized expenses
• Income from associates and income attributed to minority interest
• EBITDA, EBITDAR, and Funds from Operations
• Non- operating items and reporting of discontinued operations
• Ratios to assess the quality and stability of earnings and cash flow
• Illustration case study: calculate key ratios
• Key asset categories on balance and off balance sheet
• The meaning of net working capital
• Fixed assets, Intangible assets
• Depreciation, amortization, depletion
• Sector specific off balance sheet assets
• Ratios and cash flow measures to assess the efficient use of existing assets and investment need in assets
• Illustration case study: calculate key ratios
• Illustration case study: use ratios, cash flow and peer analysis to assess earning dynamics and asset efficiency.

Liability and Capital Structure

• Spontaneous finance from suppliers
• Short term and long term borrowings
• Off balance sheet and contingent liabilities
• Provisions
• Equity and reserves; retained earnings, dividend payments, share repurchases
• Debt service
• Ratios to assess the capital structure and debt service capability
• Application: calculate a debt service coverage ratio
• Liquidity
• Illustration case study: calculate key ratios
• Illustration case study: use ratios, cash flow and peer analysis to assess the funding structure, debt service capability and liquidity.

Final Case study

The case study will allow participants to apply all the tools of financial analysis to a company to make a balanced assessment of its operational performance and funding structure.