Financial Statements speak in a nutshell about the financial affairs of a business organization. The Course is intended to familiarize you with the basic concepts, elements, form, necessity & the importance of financial statements.
1. Financial Statements-A Preview
- What Financial Statements are?
- Importance of Financial Statements
- Various users of Financial Statements and how do they use them.
2. Elements of Financial Statements
- Basic Accounting Principles- Concepts & Conventions that underlie financial statements
- Accounting Equation- a tool to understand why a balance sheet tallies
- Presentation of Financial Statements
- Interrelation between Income Statement and Balance Sheet
3. Introduction to Financial Statement Analysis
This course introduces the lay out of requirements of an analyst for analysing financial performance of a company. It provides a general framework of requirements associated with analysis of balance sheet, income statement, and cash flow statement. The course gives an insight of the notes to principal financial statements, and management discussion and analysis of results. As a whole, it presents a general framework for addressing most financial statement analysis tasks.
4. Understanding the Income Statement
The course focuses on one of the major financial statements i.e., the income statement. The course details the purpose, construction, and common-size analysis of income statement. Understanding these concepts allows a financial analyst to evaluate trends in performance over several measurement periods and to compare the performance of different companies over the same period(s). Additional analyst tools such as the earnings per share calculation are also discussed.
5. Understanding the Balance Sheet
- Illustrate and interpret the components of the assets, liabilities, and equity sections of the balance sheet, and discuss the uses of the balance sheet in financial analysis.
- Describe the various formats of balance sheet presentation.
- Explain how assets and liabilities arise from the accrual process.
- Compare and contrast current and noncurrent assets and liabilities.
- Explain the measurement bases (e.g., historical cost and fair value) of assets and liabilities, including current assets, current liabilities, tangible assets, and intangible assets.
- Discuss off-balance-sheet disclosures.
- Demonstrate the appropriate classifications and related accounting treatments for marketable and non-marketable financial instruments held as assets or owed by the company as liabilities.
- List and explain the components of owners’ equity.
- Interpret balance sheets, common-size balance sheets, the statement of changes in equity,and commonly used balance sheet ratios.
6. Understanding the Cash Flow Statement
- Compare and contrast cash flows from operating, investing, and financing activities, and classify cash flow items as relating to one of these three categories, given a description of the items
- Describe how noncash investing and financing activities are reported
- Compare and contrast the key differences in cash flow statements prepared under international financial reporting standards and U.S. generally accepted accounting principles
- Demonstrate the difference between the direct and indirect methods of presenting cash from operating activities and explain the arguments in favor of each
- Demonstrate how the cash flow statement is linked to the income statement and balance sheet
- Demonstrate the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data
- Describe the process of converting a statement of cash flows from the indirect to the direct method of presentation
- Analyze and interpret a cash flow statement using both total currency amounts and common size cash flow statements
- Explain and calculate free cash flow to the firm, free cash flow to equity, and other cash flow ratios