Program Overview

Enhance your knowledge of financial analysis and learn the fundamentals of financial statement analysis, financial ratios, financial instruments and investment evaluation

The course covers:

  • Contents of accounts
  • The profit and loss account and balance sheet
  • Ratio analysis
  • Cash flow analysis
  • IFRS, IAS and the IASB
  • The time value of money
  • Project analysis
  • The cost of capital
  • Business valuation
  • Presenting financial information

“The trainer was very knowledgeable” ­ Past Attendee, BAE Systems

Program CONTENT

Day 1

Dealing with the fundamentals

Introduction to financial analysis

  • Differences in UK/US accounting terminology
  • Identifying the relationship between cash flow and profit
  • Development of an integrated cash flow model
  • Recognizing it’s all about cash
  • Understanding the relationships between the three main accounting statements.

Exercise 1 ­ Accounting terminology exercise

Fundamentals of accounting statements the profit & loss account

  • How the P&L has changed over the last 25 years
  • Detailed review of the Profit and Loss Account including explanation of all significant accounting terminology.
  • Profit types ­ trading, asset and business
  • Inventory, Depreciation, Capitalised interest,
  • Minority interests and consolidation
  • Exceptional and material items

Fundamentals of accounting statements the balance sheet

  • Detailed review of the Balance Sheet including explanation of all significant accounting terminology
  • Understanding the fixed assets note,
  • Accounting goodwill – what is it?
  • Liabilities, pension fund accounting
  • Debt and other liabilities like debt
  • Deferred tax, contingent liabilities

Financial analysis techniques – ratio analysis

  • Objectives of ratio analysis
  • Developing ratio analysis skills
  • Different types of ratios
  • How much information is there in ratios?
  • Ratio rules – avoiding errors of principle

Case study – Use of ratios

Delegates match ratios to different types of businesses. Delegates consider what ratios do and don’t tell us.

Day 2

Cash flow analysis and accounting issues

Understanding cash flows

  • Detailed review of the Cash Flow Statement
  • Analysing and interpreting cash flows
  • Summarising cash flows for analysis

Case study ­ Summarising cash flows

Delegates summarise cash flows for analysis purposes

Cash flow analysis

  • The four phases in the life of a business

Case study ­ Examining patterns of cash flows Delegates match cash flows to sectors

Cash flow analysis ­ taking it further

  • Dealing with the consequences of growth and no­

Case study ­ Growth & no­growth cash flows Delegates restate cash flows to improve their understanding of performance

Accounting abuses and update

  • Abuses of Fair Accounting
  • Basic abuses relevant to all businesses
  • More complex abuses relevant to larger groups

Case study ­ major Travel group

Delegates examine and evaluate the P&L of this major UK based travel group

Global accounting in the new century

  • Overview of the International Accounting Standards Board
  • The implications of the IAS Initiative
  • Review of new standards produced in the last five years

Day 3

Financial mathematics and project analysis

The time value of money

  • Present & future values
  • Defining the discount factor

Exercises. Discounting calculations

Net present value – developing the concept

  • NPV’s & varying future cash flows
  • Perpetuities & Annuities

Exercises. Annuities and perpetuities

Project analysis

  • Introduction to project analysis
  • Developing a forecast of the project cash flows
  • Identifying the key risk areas

Evaluating capital investment projects

  • Discounted cash flow techniques
  • Calculating the internal rate of return

Case study ­ Speculative housing project

Delegates perform investment appraisals to decide whether to proceed with a capital investment

Case study ­ Project analysis

Delegates create a summary of the project cash flows & Identify the principal project risks

Case study ­ Eight Projects

Delegates evaluate a number of projects and decide which projects should be pursued and which rejected.

Management information

  • Budgeting
  • Monthly reporting
  • Costing
  • Forecasting
  • Planning

Credit analysis ­ the basic concepts

  • Introducing credit analysis frameworks
  • Financial analysis ­ review of the issues
  • Non­financial analysis – Developing a framework

Day 4

Cost of capital and valuation

The cost of capital and the underlying corporate finance theory

  • The cost of debt
  • The capital asset pricing model
  • The tax subsidy effect
  • The cost of equity
  • Portfolio theory
  • The Equity Risk premium
  • Completing the WACC
  • Mogdiliani Miller and the theory of leverage

Funding structures

  • The relationship between business risk & financial risk
  • The four phases of the corporate life­cycle
  • Identifying appropriate funding structures
  • Recognising the drivers of funding strategies

Cash flow valuation

  • Preparing the forecast
  • Identifying the free cash flows
  • Competing the valuation

Case study ­ Beautific

Other valuation methods

  • Earnings based valuation
  • Dividend discounting
  • Asset valuation

Case study ­ Valuation methods ­ Magnificence

Delegates use a variety of methods to value a business

Funding structures

  • The relationship between business risk & financial risk
  • The four phases of the corporate life­cycle
  • Identifying appropriate funding structures
  • Recognising the drivers of funding strategies

Day 5

Case studies and presentation skills

Case study: Business analysis

Delegates analyse a business using the methods presented earlier in the course

Case study: Business valuation

Delegates value a business using the methods presented earlier in the course.

Case study: Financial presentation

In small groups delegates prepare and present a slide based presentation of the salient features gained from the analysis case in session one using spreadsheets and graphical techniques

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