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Fundamentals of Financial Analysis

Fitch Learning
Course summary
Professional Training
2 days
1,595 GBP excl. VAT
Online courses

Course description

Fundamentals of Financial Analysis

This two-day course will provide participants with the skills to analyze the financial statements of companies to effectively appraise the current position and future prospects of the business. Several annual reports are used to analyze and compare the balance sheets, income statements, cash flow statements and supporting notes of these companies. This is a highly interactive course where case studies and exercises are used to illustrate key learning points, allowing participants to apply the concepts acquired during the course to real-life scenarios.

Live Online Training

Since 2003, Fitch Learning’s industry experts have been delivering world-renowned virtual training programs to learners across the globe. Benefits include:

  • World-class video conferencing technology
  • Fully interactive, engage and network with peers using break out rooms, quizzes and polls
  • On-hand technical support team throughout
  • Attend from anywhere, across four time zones
  • Save time and costs on travel

Suitability - Who should attend?

Suitable for beginner and intermediate levels for both finance and non-finance professionals.

Outcome / Qualification etc.

Credits: 16 CPD pts.

Key Learning Objectives:

  • Understand the fundamentals of financial statements, including how the statements link and the key accounting principles that govern them
  • Analyze the balance sheet of companies and assess their position
  • Adjust and consistently analyze the income statement of companies and assess their performance
  • Carry out ratio analysis and assess the drivers of performance
  • Analyze the cash flow statement of companies and identify the cash flow drivers
  • Interpret what the suitable adjustments and analysis indicate about the prospects for company

Training Course Content

Day One

Fundamentals of Financial Statements

Understanding the philosophy and principles underlying financial statements is an excellent way to introduce what financial statements contain, why and how the rules have developed. A little bit of knowledge on this can go a long way to understanding much of the accounting that follows.

  • The process, purpose and context of accounting
    • Who/what are the driving forces behind published accounts
    • Where do the rules come from – US GAAP vs IFRS vs Local GAAP
    • What has tax got to do with anything?
    • Background accounting knowledge for analysts to help understand the basis of financial statements
  • The primary financial statements and how they link
    • Balance sheet: Showing the position of a company
    • Income statement: Showing the performance of a company
    • Cash flow statement: Showing the difference between a company’s ability to generate and spend cash
  • Key accounting principles and terms
    • Accruals concept
    • Going concern
    • The accounting equation
    • Double entry
    • Applying double entry
  • The primary financial statements
    • The purpose of financial statements
    • Analyzing the three statements: Identifying possible ways to initially analyze financial statements
    • Different formats: UK GAAP, IFRS
  • Exercise: Produce a balance sheet and income statements for a confectionary manufacturer reflecting the transactions over the year

Analysis of the Income Statement

The numbers from the income statement are probably the most widely analyzed and so that is a good place to start. In this case study session, we look at the reported figures, define the most used and analyze them before exploring why these numbers may need adjusting if we are to use them to indicate what the future performance is likely to be.

  • Analysis of the income statement
    • Capitalization vs. expense
    • Classification of expenses: Cost of sales, operating expenses
    • Revenue recognition
    • Different types of reported profit metric
      • Gross profit, operating profit, net profit, EPS
    • Cleaning up the reported numbers
      • Exceptionals and other one-off items
      • Core vs non-core
    • Profit metrics more indicative of future performance (and why)
      • EBIT, EBITA, EBITDA, underlying net income/EPS
  • Ratio analysis
    • Growth rates
    • Margins
    • Interest cover
  • Exercise: Carry out ratio analysis on two listed companies, making comparisons between the two.

Day Two

Analysis of the Balance Sheet

What are the resources at hand for the business to generate its profit? The morning session will focus on the analysis of the balance sheet, understanding the rules behind what gets recognized, at what value and how that value can fluctuate over time.

  • Analysis of the balance sheet
    • Non-current assets
    • Intangibles – what can be recognized
    • Tangibles – carrying values, useful lives and impairments
  • Current assets and working capital
  • Liabilities and provisions
  • The capital structure
    • Debt
    • Equity capital and reserves
    • Pensions
    • Non-controlling interests
    • Investments – AFS, JVs and other acronyms; why are they part of the capital structure
  • Ratio analysis
    • Net debt, Debt/Equity, Debt/Capital
    • Working capital cycle – Inventory days, Receivable days, Payable days
    • Balance sheet and income statement combined analysis
      • Efficiency of use of resources
      • Return on equity
      • Return on capital
      • Capital structure
      • (Net) debt / EBITDA
  • Exercise: Carry out further ratio analysis on two listed companies, making comparisons between the two.

Use Ratio Analysis to Identify the Company

  • Exercise: Ratio mix and match: Identify the business sectors of several companies given a grid of ratios. Discuss how the decision was made.

Analysis of the Cash Flow Statement

The cash flow statement is, fundamentally, free from any accounting judgement/manipulation and could be used as trustworthy source for analysis. This session shows how a cash flow statement links in with the other financial statements before discussing the limitations of it as a source for analysis.

  • Deriving cash flow using the indirect method
  • Exercise: Produce a cash flow statement reflecting transactions provided
  • Analysis of the cash flow statement
    • Definitions of free cash flow and CFADS (cash flow available for debt service)
    • How to analyze the cash flow statement: Asset management, operational management, financing strategy
      • EBITDA cash conversion
      • Capex/depreciation
      • Cash-based interest cover
  • Cash flow drivers
    • PESTEL
    • Porter’s Five Forces
  • Exercise: Carry out further ratio analysis on two listed companies, making comparisons between the two

Why choose Fitch Learning

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Over 1,300 clients worldwide

CPD recognized

About provider

Fitch Learning

Live Online Training Since 2003, Fitch Learning’s industry experts have been delivering world-renowned virtual training programs to learners across the globe. Benefits include: World-class video conferencing technology  Fully interactive, engage and network with peers using break out rooms, quizzes and...


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Fitch Learning

17th Floor, 25 Canada Square
E14 5LQ Canary Wharf London

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Reviews

Average rating 5

Based on 1 reviews.

N.H.
The course offered clear, concise explanation of pertinent material, as well as helpful examples and participant discussion. It was the best financial trainining course I have ever taken. N. Harihareswara, US Agency for International Development
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