Understanding Financial Statement

Course details

This programme is specially designed to be used in discussions related to the main features of the financial statements prepared by a business enterprise. Participants will learn to understand the meaning and fundamental structure of financial statements, and the inter-relationship of the items in the statements. In addition, participants will learn to apply key management ratios to evaluate the strengths and weaknesses of the business operations. 

PROGRAMME OBJECTIVES

1. To understand the meaning and fundamental structure of financial statements and the inter-relationship of the items in the statements
2. To apply key management ratios to evaluate the strengths and weaknesses of the business operations 

PROGRAMME OUTLINE

1. WHAT DO WE KNOW ABOUT FINANCIAL STATEMENTS?

• Nature and role of accounting; Desirable qualities of a financial report
• Accounting as an information system; Financial and Management Accounting compared
• Fundamental accounting assumptions; Accounting policies
• Objectives of financial statements. User groups and their areas of interest

2. THREE BASIC FINANCIAL STATEMENTS:

• Balance sheet
• source and use of funds approach
• vertical format presentation
• current assets
• fixed assets
• liabilities
• shareholders funds
• capital employed
• net worth
• working capital
• long & short b/s analysis

Profit and loss account 

• timing adjustments
• distribution or appropriation of profits
• and cash flow statement

Cash Flow Statement 

• operating cash cycle
• relationship between depreciation and cash flow
• non-operating cash outflows and inflows   

3. INTERPRETATION OF AUDITOR’s REPORTS

• Objectives and scope of audit Reasonable assurance
• True and Fair View
• Auditors opinion - unqualified, emphasis of matters, qualified, disclaimer, dverse opinion

4. LIQUIDITY RATIOS PROFITABILITY RATIOS

• Importance of profitability
• Meaning of return on investment
• Drivers of margin on sales
• Drivers of sales to total assets
• Operating profit model

5. SOLVENCY RATIOS 

6. ASSET MANAGEMENT RATIOS

7. STOCK MARKET RATIOS