Advanced Financial Statements Analysis

Objectives

• Read and understand their organisation’s Annual Financial Report
• Evaluate their firm’s financial performance
• Understand and use analytical tools and techniques in practical case-study situations.
• Use analytical techniques to project future performance.
• Make critical judgements of accounting policies when evaluating company performance
• Appreciate the importance of new investments in maintaining growth and competitiveness.
• Improve their management skills and increase their value to the organization

Outline

Introduction to Advanced Financial Analysis
• Who are the users of financial data?
• What types of financial information are available to each user group?
• The published Annual Financial Report (AFR) – what is its purpose?
• The structure and contents of an AFR – comparison of UAE, UK, and US versions
• The non-financial elements of the AFR – how important are these?
• Understanding the three main financial statements: Income Statement, Balance Sheet, Cashflow Statement.
• Comparison of different formats for the financial statements.
• Identifying the important numbers from the financial statements.
• Case study to show how the Income Statement, Balance Sheet, and Cashflow Statement are inter-linked and inter-dependant.
Understanding and Analysing the AFR
• Why do we need to analyse the AFR?
• Using common-size analysis to improve comparability
• Calculating trends and growth patterns
• Using Ratio Analysis to assess five key aspects of company performance:
o Profitability
o Liquidity
o Efficiency and Working Capital Management
o Financing Structure and Risk
o Investment Performance and Potential
• Case Study on analysis and interpretation of company performance
Analytical tools and how to analyse the Cash flow Statement
• Introduction to Excel tools for analysing financial statements.
• Setting up spreadsheets for common-sizing and ratio analysis
• Using statistical tools mean, standard deviation, regression analysis.
• Using graphical representation.
• How to access data and analysis from Bloomberg and Yahoo! Finance.
• Why do we need the Cash flow Statement?
• Key ratios we can calculate from the Cash flow Statement.
• How to use current cash flow information to forecast future revenues and profits
Financing the Business and Valuing the Business
• Analysing the Balance Sheet to identify debt and equity, short-term and long-term financ
• Measuring the company’s capital structure, and estimating the costs of capital:
o Cost of Equity (Ke), using DVM and CAPM
o Cost of Debt (Kd)
o Weighted Average Cost of Capital (Ko)
• Case study on Cost of Capital calculation
• Why do we need to value a business?
• Business valuation models:
o Net Asset value – balance sheet, replacement cost, or realisable value
o Price/Earnings ratio value
o Dividend growth value
o Present value of future free cash flows
• Case study on valuing a business
Identifying creative accounting and forecasting future failure
• What is creative accounting?
• Who benefits from creative accounting?
• How does creative accounting work? – some illustrative examples.
• Creative accounting scandals – Enron, Worldcom, Parmalat
• The symptoms of financial distress – financial and non-financial factors
• Using ratio analysis to identify financial distress or predict future failure
• Forecasting future failure using ratio combinations – the Altman Z-score model
• Case study on forecasting future failure

Who Should Attend ?

Accountants
Financial Analysts
Evaluation Officers
Appraisal Executives
Corporate Finance Executives
Mergers & Acquisitions Officers
Project Managers