Financial Statements Analysis

1. Introduction

Financial analysis is a process of selecting, evaluating, and interpreting financial data, along with other pertinent information, in order to formulate an assessment of a company’s present and future financial condition and performance.

2. Scope

Help the business owners and other interested users to analysis and evaluate the data in the financial statements in order to assess the performance and viability of your business model.

3. Objectives

• Explain the meaning, need and purpose of financial statement analysis.
• Identify the various techniques and tools of analysis of financial statements including applying of horizontal analysis, Vertical analysis and comparative analysis.
• Identify and compute ratios used in analyzing a firm’s liquidity, activity, Leverage, profitability, and solvency .
• Explain the operating cycle and its components and how it effects on the company’s need for liquidity.
• Understand the concept of earning power, and how irregular items are presented.

4. Benefits

• Identify the tools of financial statement analysis and its techniques.
• Explain and describe how to apply horizontal analysis and vertical analysis.
• Discuss the importance of comparative analysis and comparison basis: Intra-company, Inter-company and Industry Average.
• Identify and compute ratios used in analyzing a firm’s liquidity, activity, profitability, solvency and other financial ratios.
• Explain how to construct a model that explains the sources behind Return on Investment (ROI).
• Understand the concept of earning power, and how irregular items are presented.
• Understand the concept of quality of earnings.
• Explain how to extract the key performance Indicators “KPIs” to provide users with better information for decision making purposes.