This course presents an introduction to financial statement analysis and its usage when assessing business performance. The first part of the course will focus on understanding the most important financial statements, namely, the balance sheet, the income statement, and the statement of cash flows. We will then focus on how we can understand the financial health and performance of the company by examining a number of important financial ratios that are derived from the financial statements of the company.
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Finally, we will be able to understand business performance across years comparing main results and indicators extracted from financial statements. Lectures on concepts will be supplemented with numerical examples and suggested readings.
This course is part of the Data & Finance for the future Specialization.
What you'll learn
- Interpret the main financial statements and reports
- Understand business performance across time
- Evaluate company results and peer comparison
- Use financial ratios to diagnose the company's economic status
Syllabus
Accounting: the language of business
In week1, we will cover an introduction to the balance sheet as business’ picture, focusing on accounting and its users and how a balance sheet is built. Next, we go on to understand the income and cash flow statements as business movies focusing on their principal accounts. Finally, we integrate the 4 statements using a restaurant as example.
Income Statement Analysis
In week 2, we will cover: company’s financial condition and performance across time (horizontal analysis) and to a base amount (vertical analysis); margin – a profitability measure; EBIT and EBITDA (the income provided by the company’s business, the operating result); net income (the results for the company's shareholders); tax shield.
Balance Sheet Analysis
In week 3 we will better understand the balance sheet and important analyses we can perform with its data: liquidity ratios; receivables and inventories ratios; operational and financial liabilities; working capital; and cash cycle.
Cash Flow Analysis
In week 4 we will discuss cash flow analysis, covering: cash flow from operations; cash flow from investing; cash flow from financing.
Integrated Company Analysis
In week 5 we will put everything together and perform a step-by-step analysis.