Understanding Financial Statement

Course Overview

This 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 course 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.

Course Objectives

Participants would be able to use financial statements for decision making purpose

Course Outline

Introduction to financial statements and commonly used terminology

• The purpose payback model
• Relate a business to its balance sheet and profit and loss account
• Typical presentation of company financial statements
• A glossary of common financial terminology.

Focus on the key components of financial statements and highlight some of the variances of financial disclosure

• IFRS presentation of company financial statements
• Key balance sheet categories
• Profit and loss account
• Cash flow statements
• Sources and quality of disclosure
• Key accounting policies
• Notes to the accounts.

How the presentation of financial statement is driven by the characteristics of the business

• Operating performance and the business cycle
• Accounting for sales and expenses
• Ratios to assess the quality and stability of earnings
• Key asset categories
• Return on assets and its components
• The meaning of net working capital
• Fixed asset efficiency
• Deriving a cash flow statement
• Operating, investment and financing cash flows

Understand how and why different companies fund their businesses

• Spontaneous finance from suppliers
• Debt and equity: short term versus long term
• Liquidity and solvency
• Accounting for liabilities
• Funding ratios
• Debt service obligations
• Dividend policy on earnings and cash flow
• Off balance sheet liabilities
• Using the cash flow to analyse a company's ability to service its financial obligations

Measure of performance using financial ratio analysis and their limitations

• Return on equity and its components
• Evaluate performance using peer analysis