Financial Statements and the Annual Report

• Understanding the income statement, balance sheet, and cash flow statement
• Other comprehensive income components
• Accounting considerations in financial analysis
  • Receivables and the Expected Credit Loss (ECL) provision
  • Fixed assets accounting options: Cost vs. Fair Value models
  • Accounting for capital expenditures and impairment
  • Impact of lease accounting
  • Various investment accounting considerations
  • Accounting treatment of goodwill
• Content of the annual financial report
• Non-financial elements of the annual financial report
• Types of external audit opinions
• Management Discussion and Analysis (MD&A)

Basics of Macroeconomic and Industry Analysis

• Macroeconomic factors to assess country exposure
• Indicators of Gross Domestic Product (GDP), unemployment rate, inflation and interest rates
• Deficit-to-GDP, debt-to-GDP, and GDP growth rates
• Industry analysis: Understanding Michael Porter’s Five Forces shaping an industry’s competitiveness
  • Threat of new entrants
  • Threat of substitutes
  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Rivalry of competitors
• Segment reporting in annual reports

Financial Ratios Analysis Using Excel

• 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
  • DuPont analysis
• Altman Z-score to assess potential bankruptcy
• Using graphical representation

Assessing the Quality of Financial Reports

• Quality of financial reporting vs. quality of earnings
• Framework for assessing a company’s quality of financial reports
• Potential problems that affect the quality of financial reports
• Beneish model: M-score to describe the degree to which earnings are manipulated
• Evaluating the earnings quality of a company
• Evaluating the cash flow quality of a company
• Indicators of financial position quality
• Sources of information about risk

Financial Forecasting Techniques for Analysts

• Revenue forecasting: Bottom-up versus top-down
• Forecasting cost of goods sold
• Forecasting fixed and variable costs
• Forecasting financial position accounts
  • Working capital: accounts receivables, inventory, payables
  • Fixed assets forecasting
  • Retained earnings and dividend pay-out policy
• Modeling financial statements forecast