Advanced Financial Analysis

This course brings together the key elements of financial statement analysis to help participants improve their financial analysis skills, enable them to ask the right questions, see the real risks facing businesses and investors, feel more confident in their ability to comment on business activities and performance and analyze financial health for management. These skills and the required technical knowledge will be put into practice throughout the course using interactive examples and case studies, putting theory and technique into context.

Course Methodology
The course uses a mix of interactive techniques, such as brief presentations by the consultant, group exercises and case studies using Excel to apply knowledge acquired throughout the course, followed by presentations by the participants of the results.

Course Objectives
By the end of the course, participants will be able to:

• List and differentiate between the important components of basic financial statements
• Explain financial statements' ratios and formulate Excel sheets and graphs for financial statements analysis
• Illustrate creative accounting schemes and critique the validity of accounting rules used
• Assess the quality of financial reports and evaluate quality of earnings and cash flows reported
• Analyze the financial position and performance of a company over a period of time and draw conclusions regarding its sustainability

Target Audience
Chief accountants, accounting managers, senior accountants, finance directors, finance managers, financial analysts, financial controllers, financial accounts managers, heads of finance departments, credit controllers, corporate financiers, credit risk analysts, bankers, and relationship managers.
Target Competencies

• Understanding financial statements
• Reading annual reports
• Processing financial data
• Financial analysis
• Credit analysis
• Risk management
• Criticizing financial reporting standards used
• Applying professional skepticism
• Identifying financial fraud

Course Outline

• Introduction to advanced financial analysis
• Users of financial data
• Content of the annual financial report
• Regional versus global standards Non-financial     
• Elements of the annual financial report and     their importance   
• Emotional and cognitive biases affecting analysts’ judgment
• Understanding the income statement, balance sheet and cash flow statement Other comprehensive income components
• Basics of industry analysis and analyzing ratios using Excel
• Top-down approach for analysis   
• Macroeconomic factors to assess country exposure   
• Indicators of GDP, unemployment rates, inflation and interest rates   
• Deficit-to-GDP, debt-to-GDP and GDP growth rates  
• Industry analysis: understanding Michael Porter's five forces shaping industry's long term profitability
• Starbucks, Apple Inc., Nike and McDonald’s cases Common size analysis to improve comparability
• Calculating trends and growth patterns Ratio analysis to assess key aspects of company performance:
• Profitability
• Liquidity
• Efficiency and working capital management
• Financing structure and risk
• Altman Z-score to assess potential bankruptcy
• Using graphical representation
• Financial cosmetics and creative accounting
• Last In First Out (LIFO) versus First In First Out (FIFO) and the effect on profits and taxes
• Explaining LIFO reserve and LIFO liquidation
• Converting reported inventory from LIFO to LIFO for purposes of comparison Valuing inventory at net realizable value: looking for signals of obsolete inventory Analyst's consideration when examining inventory
• Evaluating how capitalizing versus expensing costs affect financial statements and ratios Effect of different depreciation methods on financial statements
• Impairment and revaluation of property, plant and equipment
• The choice of operating lease or finance lease Using special purpose vehicles for balance sheet manipulation Joint ventures: using equity method Consolidation: inflating goodwill by using full goodwill instead of partial goodwill method Employees' compensation: completeness of end-of-service indemnity obligation Stock options and stock grants instead of bonuses
• Case study: creative accounting scandals of Enron, Worldcom, Parmalat
• Assessing quality of financial reports
• Framework for assessing company's quality of financial reports
• Potential problems that affect quality of financial reports
• Defining concept of sustainable and persistent earnings
• Beneish model: M-score to describe degree to which earnings are manipulated Recommending adjustments to improve quality and comparability
• Evaluating the earnings quality of a company
• Evaluating the cash flow quality of a company
• Indicators of balance sheet quality
• Sources of information about risk
• Case study: investment decision at Nestle