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Financial Statement Analysis

Rating:
4.8
English
Intermediate
7 Nasba
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Course Overview

The ability to analyze companies is predicated on a set of skills that can only be taught by practitioners and experienced professionals. This course will provide you with the building blocks of financial analysis with tools and techniques you can directly apply on any company as well as different industries.
This course is case study driven with practical exercises, group discussion and thought-provoking discussions. Do not miss this course. This is an intensive program covering a wide array of financial analysis topics. The program assumes the participant has a foundational knowledge of accounting issues, as these form the starting point for the analytical methods examined.
This five-day program is comprehensive, and case study driven. The program director has a number of years of experience working in commercial banks as well in the fields of investment (private equity advisory). His examples are thought-provoking and are designed to elicit active group discussion. Emphasis is on the practical.

Key Takeaways

1
Practical understanding of how to read and interpret company annual reports
2
Establishing an accounting foundation critical to understanding financial statements
3
Ability to evaluate company strategies and to identify risk areas
4
Analyzing the liquidity and solvency status of a company
5
Determining appropriate context when assessing a company from an investment point of view (equity) and/or as a lending proposition (credit)

National Association of State Boards of Accountancy
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LEORON Professional Development Institute DMCC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.NASBARegistry.org

Course Outline

Day 1
Course Background and Overview
→ Delegate introductions and course objectives
→ High level overview of course content
Corporate Financial Information
→ Value of the annual report
→ Understanding the mandatory and discretionary sections of the annual report
• Information available in the annual report
− Auditor’s report
− Explanation of the business
− Discussion of risk analysis
Risk assessment documents in annual report
− US Management discussion and analysis 10K and 20F documentation
− UK Operating and financial review (OFR)
− EU Directors report
→ Delegate introductions and course objectives
Auditors and Comfort to Analysts
→ What auditors do – does it give us comfort that the numbers and information is accurate?
Negligent audit claims and why they happen.
→ Overview of the different types of audit reports
→ Limitations of the audit report
Case study: Group discussion to determine which type of audit report to issue and impact on the analysis.
Inputs from Accounting Information
→ Overview of accounting information and the basis of preparation
• Management accounting
• Financial accounting
• Tax accounting
→ The conceptual basis of IFRS
• The global movement to IFRS
• Principles vs. rules-based accounting
• How accountants define assets and liabilities
Case study: Using the annual report -- in particular management’s analysis as well as selected notes to the financial statements - of an international producer of methanol, participants will examine and explain the performance of the company, citing data and evidence to support their observations. The examination will focus on:
− Revenue growth in the context of the business (economic) cycle
− Volume/price relationships
− Gross profit and net profit and likely cost structures
− Competitive context
− Industry risk factors
− Expected future performance, based on management commentary
This is a comprehensive case study that will be supported by handouts from the program director in what we call an “onion” approach: the more we peel, the more questions arise that need to be addressed in order to reach a conclusion.
Participants will learn how to look beyond the numbers.
Day 2
Overview and Summary of the Key Components of Financial Statements
→ Statement of comprehensive income
• Profit or loss
• Other comprehensive income
• What it tells you (and doesn’t)
→ Statement of financial position
• Assets, liabilities and equity
→ Distinction between profit and cash – accrual accounting
→ Different presentation formats of financial statement
→ Cash flow statement and analysis
• Operating, financing and investing activities
• Interpreting the cash flow statement
• Analyzing a company’s cash flow
• Linking operational cash flows with profit or loss from operations
• Introducing EBITDA (Earnings before interest, tax, depreciation and amortization)
• Problem areas to look out for
Case study: Preparation of a cash flow statement; group discussion and analysis of the numbers.
→ Deeper look into the cash flow statements and how to use them
• Determining and using free cash flow
• Linking operational cash flows with profit / loss from operations and EBITDA
− Problem areas to look out for
− Assessing risk when operational cash flows are negative
The Importance of Strategic Planning Strategy Formulation
→ Internal and external analysis – session driven by a privatization case
→ Redefining corporate objectives of a state company undergoing privatization
Case study: Group work on strategic objective setting for a privatizing telecoms company
PESTEL
→ External corporate appraisal – session based on a pharmaceuticals company, using the PESTEL framework, which covers a broad range of risks, ranging from political to economic, social, technological, environmental to legal/regulatory.
Case study: Group work on risk identification review of a pharma company
Other Frameworks and Models
→ Porters Five Forces – effective use to examine market positioning – discussion of how to apply in strategic execution
→ Value chain – with examples from actual companies – emphasis on how to identify opportunities.
→ Effective use of benchmarking
Day 3
Working Capital and Liquidity Issues
→ The working capital cycle
• Components of working capital
• Examination of working capital and liquidity issues
• Interpreting the working capital ratios and what action should be taken
• Review of working capital ratios to peer groups and how to draw conclusions
• Extracting potential for improving performance and results
Case Study: Numerical exercises on the working capital cycle with discussion of the “how” to monitor and practical solutions to improve working capital efficiency.
→ Receivables management
• Cash and credit options
• How to assess credit policy alternatives
• Leveraging receivables with factoring or invoice discounting
Case Study: Calculating and determining an optimal credit policy, calculations on costing of asset backed financing with factoring or invoice discounting.
Financial Ratios – Interpretation and Use
→ Common-size income statements
→ Profitability and return ratios
→ Short-term solvency and liquidity
→ Efficiency ratios
• Operating cycle
• Cash conversion cycle
• Working capital dynamics
→ Long-term solvency and stability
→ Leverage ratios
• Operating leverage
• Financial leverage
• Measuring the riskiness of leverage
→ Shareholder’s and investment ratios
Using the DuPont Framework for Assessing Performance
→ Detailed examination of financial ratios linking financial statements and practical realities of the business
• Discussion of the three levers in the DuPont analysis
− Earnings and efficiency in earnings
− Ability to turn assets into profit
− Financial leverage
• Finding the red flags
• Limitations of ratios – can they serve as early warning indicators
Case study: The above ratios will be computed/analyzed in the context of a pharmaceutical company. The group work focuses not just on number crunching but making adjustments and fine tuning the numbers based on understanding the different structural composition of the companies. This example demonstrates how the initial ratios.
Day 4
Corporate Failure Indicators
→ Adverse trading
→ Risk of working capital deficiencies.
• Meaning and risks of overtrading
• Conditions under which negative working capital can be sustainable
Case Study: Calculations and discussion to ascertain if a company is at risk of overtrading coupled with solutions / alternatives to tackle this risk.
Looking Back at Corporate Scandals
→ Overview of significant scandals
• WorldCom
• Bernie Madoff
• Enron
− Discussion and analysis on red flags in Enron’s financial statements
− Analyst oversights and mishaps with Enron
Case Study: Analyzing the risk of accounting profit not supported by cash flows
Assessing Management
→ How critical is management assessment? What data can we use to judge competence?
Case Study: Review of strategic decisions undertaken by the CEO of a German travel company (TUI)
What To Do With Failing Companies
→ Defining the problem: Liquidity vs. insolvency
→ Defining the solution: Restructuring vs. liquidation
Case Study: Evaluating a restructuring proposal of a company in financial distress
Day 5
Developing Cash Flow Projections - Cash Flow Modeling
Case Study: Using the financials of a major pharmaceutical company, groups will review the output of a comprehensive financial model that includes ratio analysis and projections over a period of 3 years
→ The case will be based on company historical financials (actuals) serving as a baseline
Objectives
→ To evaluate the strategic prospects and expected financial condition of the company based on a number of assumptions relating to growth and profitability.
→ The following issues will be addressed:
• Determining when cash flow projections are required in financial statement analysis
• Separating the continuing business from the growth business
• Interrogating the assumptions underlying the projections
• Considering alternative scenarios and their implications
• Evaluating future cash flow and debt service capacity
• Observations relating to maintenance vs development capex
• Financial ratio analysis with a view to identifying vulnerabilities
→ Participants will work in groups and present their findings in bullet point summaries
Wrap-up session and Final exam

Who Should Attend?

This highly practical and interactive course has been specifically designed for
This course has been specifically designed for the benefit of:
→ Financial analysts
→ Corporate/strategic planning staff
→ Management accountants/ Financial controllers
→ Financial accountants (Accounting and reporting)
→ Executives and senior managers who do not have a finance specialization

FAQ

What language will the course be taught in and what level of English do I need to take part in an LEORON training program?
Most of our public courses are delivered in English language. You need to be proficient in English to be able to fully participate in the workshop and network with other delegates. For in-house courses we have the capability to train in Arabic, Dutch, German and Portuguese.
Are LEORON Public courses certified by an official body/organization?
LEORON Institute partners with 20+ international bodies and associations.We also award continuing professional development credits (CPE/PDUs) for:1. NASBA (National Association of State Boards of Accountancy) 2. Project Management Institute PDUs 3. CISI credits 4. GARP credits 5. HRCI recertification credits 6. SHRM recertification credits
What is the deadline for registering to a public course?
The deadline to register for a public course is 14 days before the course starts. Kindly note that occasionally we do accept late registrations as well, but this needs to be confirmed with the project manager of the training program or with our registration desk that can be reached at +1071 4 1075 5711 or [email protected]
What does the course fee cover?
The course fee covers a premium training experience in a 5-star hotel, learning materials, lunches & refreshments, and for some courses, the certification fee and membership with the accrediting bodies.
Does LEORON give discounts?
Yes, we can provide discounts for group bookings. If you would like to discuss a discount on a corporate level, we will be happy to talk to you.

Reviews

  • Review:
    IAMM Internal Audit Maturity Model
    In recognition of their dedication and contribution supporting IKEA Saudi Arabia in arranging training programs during 2017 & 2018, looking forward for more development and exciting effort this year. On behalf of IKEA Saudi Arabia, THANK YOU!
    Dalal Kutbi
    Country Learning & Development Manager at IKEA Saudi Arabia
  • Review:
    Certified Professional in Quality and Patient Safety
    Dating back to 2014, Mobily’s “LEORON” experience has grown from a single collaboration to a long-term partnership. We consider ‘’LEORON” Institute as a strategic partner, whose contribution has been nothing but premium in equipping our staff with field-based knowledge and information. Past three years have resulted with an expanded collaboration with superior customer service and support. Best Regards,
    Turki S. Alsahaan
    Dir L&D, Talent Management at Mobily, Etihad Etisalat Company
  • Review:
    Certified Professional in Quality and Patient Safety
    Since the partnership was signed between BAE Systems Saudi Development & Training and LEORON in 2017, we have been working together to offer the Saudi market a complete portfolio of training solutions benefiting from the wide and extensive experience of both parties. Recognizing the great success of this partnership, we are looking for further collaborations in the future that will position both companies as one of the leading training providers in Saudi Arabia. We thank the LEORON team for their full cooperation and continuing support, and look forward to further success together in the years to come.
    Emad Alrajih
    VP, Business Winning at BAE Systems Saudi Development & Training
  • Review:
    Certified Professional in Quality and Patient Safety
    We have been working with LEORON for the past two years and will be working with them again this upcoming year. The programs they delivered were fruitful and exciting and our organization has received positive feedback from the participants. What our organization aims to do is to provide at no cost training for all the private sector employees so that they may benefit from our offered programs in Innovation and Professional development. Leoron has helped us achieve this goal. We look forward to continuing this service and wish them the best of luck. Regards,
    Nasser M. Al-Subaie
    Sr. Program Officer, Enterprise Learning & Human Development at Kuwait Foundation for the Advancemen