Analysis & Uses of Financial Statements - Ratio Analysis
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Author: Dr. J Shim - Delta Publishing
Copyright © 2010 | Field of Study: Accounting Level: Basic Recommended CPE Credit 6 hours Prerequisites: None Advanced Preparation: None Type of Delivery: Self-Study Expiration: Course expires 1 year after purchase Course Update: June, 2009 Accreditation: QAS, NASBA Guarantee/Complaint Resolution |
Course Outline
Lesson 1 - Analysis of Liquidity and Activity
Learning Objectives 1
Introduction 1
Liquidity Ratios
Activity Ratios
Operating Cycle of A Business
Interrelationship of Liquidity and Activity to Earnings
Other Considerations
Summary 1
Lesson 2 - Analysis of Solvency and Capital Structure
Learning Objectives 2
Introduction 2
Solvency (Leverage and Debt Service)
Capital Structure Ratios
Shareholders' Equity To Total Assets
Number of Times Interest Earned
Leverage
Cash Flow Ratios and Solvency
Summary 2
Lesson 3 - Profitability Analysis
Learning Objectives 3
Profitability
Quality of Earnings
Return on Investment
Summary 3
Lesson 4 - Market Strength and Overall Evaluation
Learning Objectives 4
Earnings Per Share
Market Test Ratios
Some Other Considerations
Is Ratio Analysis a Panacea?
Summary 4
Lesson 5 - Analysis of Cash Flows
Learning Objectives 5
Introduction 5
Preparing and Analyzing the Statement of Cash Flows
Trend Analysis and Industry Comparison
Cash Flow Coverage (Adequacy) Ratios
Cash Debt Coverage Ratio
Cash Dividend Coverage Ratio
Cash Interest Coverage Ratio
Cash Flow Performance Measures
Cash Flow Return on Asset and on Equity
Cash Flow Per Share
Cash Flow to Operating Income
Price/Cash Flow Ratio
Lesson 6 - Interim Statements and Segment Analysis
Learning Objectives 6
Introduction 6
Interim Financial Report
Segment Reporting
Summary 6
Course Objectives
Lesson - 1After reading this lesson, you should be able to:
1. Define working capital.
2. Compute and interpret liquidity ratios.
3. Compute and interpret activity ratios.
4. Define operating cycle and cash conversion cycle.
5. Define liquidity and activity and explain how they relate to each other.
6. Describe the LIFO reserve and explain its importance for comparing results of different companies.
Lesson - 2
After reading this lesson, you should be able to:
1. Define solvency.
2. List capital structure ratios and explain what they measure.
Lesson - 3
After reading this lesson, you should be able to:
1. List and explain various ratios related to profitability.
2. Explain what ROI or ROA is.
3. Identify the basic components of the Du Pont formula and to explain how it can be used for profit improvement.
4. Interpret and compute ROE how it relates to ROI.
5. Describe how financial leverage affects the stockholder's return.
Lesson - 4
After reading this lesson, you should be able to:
1. Differentiate between two different capital structures—simple and complex.
2. Compute earnings per share in a simple capital structure.
3. Compute earnings per share in a complex capital structure.
4. List market test ratios and calculate them.
5. Form an overall evaluation on a company’s financial performance.
6. Summarize the limitations of ratio analysis.
A final group of ratios are useful in testing the market strength of a company. They relate the firm’s stock price to its earnings (book value, sales, cash flow) per share. They also include dividend-related ratios.
Lesson - 5
After reading this lesson, you should be able to:
1. Describe the purpose of the statement of cash flows.
2. Identify the major classifications of cash flows.
3. Prepare and analyze the statement of cash flows.
4. Differentiate between net income and net cash flows from operating activities.
5. Distinguish between cash flow coverage (or adequacy) ratios and cash flow performance measures.
6. Analyze and interpret two major categories of cash flow ratios.
Lesson - 6
After reading this lesson, you should be able to:
1. Describe the accounting problems associated with interim reporting.
2. Outline the disclosure requirements for major segments of a business.