International Financial Statement Analysis

UNIT 1. INTRODUCTION AND THE BALANCE SHEET

4 HOURS

** Financial accounting focuses on communicating information to external users, information that is communicated using financial statements that are prepared at the end of each period (one month, one quarter (three calendar months) or one year).

There are five financial statements: the income statement (called statement of operations in some countries), balance sheet, statement of cash flows and notes to the financial statements and statement of changes in equit. Each of them is introduced in the following sections using different examples. In this chapter our focus will be on the Balance Sheet.

1.1. The Balance Sheet:

1.1.1. Assets.

1.1.2. Liabilities and Equities.

1.1.3. The valuation of the components of the Balance Sheet.

1.2. The classified Balance Sheet:

1.2.1. Current Assets.

1.2.2. Non-Current Assets.

1.2.3. Current Liabilities.

1.2.4. Non-Current Liabilities.

1.2.5. Owner´s or Shareholders Equity.

1.3. The Balance Sheet Structure.

UNIT 2. THE INCOME STATEMENT

4 HOURS

** The Income Statement shows details and results of the company profit-related activities for a period of time. Is a summarization revenue and expense transactions for a period of time, and it is particularly important for the company’s owners, creditors, and other interested parties to understand.

The Income Statement is a financial statement that measures the performance of the firm over a period of time. It shows the profit generated and its different components.

Its basic equation is: Revenues – Expenses = Net Profit. For this reason, the Income Statement is also called the Statement of Profits and losses (the P&L).

2.1. Income Statement sections:

2.1.1. Detailed analysis of the Income Statement by function.

2.1.2. Detailed analysis of the Income Statement by nature.

2.2. The importance of the gross margin.

UNIT 3. STATEMENT OF CASH FLOW. NOTES TO THE FINANCIAL STATEMENTS. STATEMENT OF COMPREHENSIVE INCOME & STATEMENT OF CHANGES IN EQUITY ANNUAL REPORT. CONSOLIDATED FINANCIAL STATEMENTS

4 HOURS

3.1. The Statement of Cash-Flow:

3.1.1. CFO and methods to calculate the document.

3.1.2. The indirect method in detail and a healthy structure.

3.2. Notes to the financial statements.

3.3. Statement of Comprehensive Income & Statement of Changes in Equity:

3.3.1. Statement of Comprehensive Income.

3.3.2. The Statement of Changes in Equity.

3.4. Annual Reports.

3.5. Consolidated Financial Statements:

3.5.1. Subsidiary.

3.5.2. Associate.

3.5.3. Joint Venture.

3.5.4. Trade or Simple Investment.

UNIT 4. INTERNATIONAL ACCOUNTING DIFFERENCES AND ACCOUNTING MANIPULATIONS

4 HOURS

4.1. Accounting Standards: US GAAP vs IFRS:

4.1.1. US GAAP.

4.1.2. IFRS.

4.1.3. International Accounting differences.

4.1.4. Internationalization of accounting standards?

4.2. Accounting manipulation and creative accounting:

4.2.1. Creative Accounting:

4.2.1.1. Massaging the numbers.

4.2.1.2. Cooking the books.

4.2.2. Fraud detection and actions to fight against creative accounting.

UNIT 5. FINANCIAL STATEMENT ANALYSIS (CALCULATIONS PART 1)

12 HOURS

** Financial Statements, including the Balance Sheet, Income Statement, and Statement of Cash Flows, provide a wealth of information that is helpful in performing this significant task. The analysis of this information will give you the chance to identify strengths, weaknesses, opportunities, and threats about your firm.

Performing a complete analysis will allow you to see a radiography of the firm that will be crucial for taking important decisions as a manager, shareholder, etc.

5.1. Horizontal and vertical analysis:

5.1.1. Balance Sheet analysis:

5.1.1.1. Horizontal analysis.

5.1.1.2. Vertical analysis.

5.1.2. Income Statement analysis:

5.1.2.1. Horizontal analysis.

5.1.2.2. Vertical analysis.

5.2. Balance Sheet ratios:

5.2.1. Liquidity ratios:

5.2.1.1. Current ratios.

5.2.1.2. Quick ratio.

5.2.1.3. Cash ratio.

5.2.1.4. Debtor collection period and Creditor Payment period.

5.2.2. Debt ratios:

5.2.2.1. Debt ratio.

5.2.2.2. Quality of debt ratio.

5.2.2.3. Other ratios.

5.2.3. Inventory ratios:

5.2.3.1. Inventory turnover.

5.2.3.2. Days in inventory.

5.2.4. Working Capital Cycle or Cash Conversion Cycle (CCC).

UNIT 6. FINANCIAL STATEMENT ANALYSIS (CALCULATIONS PART 2)

12 HOURS

** After dealing with the vertical and horizontal analysis of the balance sheet and the income statement and understanding the calculations and meaning of balance sheet ratios (including liquidity, debt or inventory), now it’s time to focus on income statement ratios (profitability, stock valuation).

6.1. Income Statement ratios:

6.1.1. Return On Assets (ROA).

6.1.2. Return On Equity (ROE).

6.1.3. Return On Sales (ROS).

6.1.4. Interest cost over sales ratio.

6.2. Statement of Cash Flow ratio: free cash flow.

6.3. Bankruptcy risk ratio: Z ALMAN.

6.4. Stock valuation ratios:

6.4.1. Earnings Per Share (EPS):

6.4.1.1. Basic EPS.

6.4.1.2. Diluted EPS.

6.4.2. The price / Earnings Ratio (P/E).

6.4.3. Dividend Yield.

6.4.4. Dividend Cover.

UNIT 7. FINANCIAL STATEMENT ANALYSIS (CASE STUDIES)

10 HOURS

** The main of goal of this section is to analyze different firms using the techniques learned in the other parts of the course. In order to solve the different exercises it’ll be necessary to use different techniques such ratios analysis, horizontal and vertical analysis of the balance sheet and the income statement and also a complete an analysis of the statement of cash flow or notes to financial statements.

7.1. Case Study 1: habitat.

7.2. Case Study 2: exercise analysing an Income Statement just using the vertical analysis.

7.3. Case Study 3: exercise analysing financial statements results.

7.4. Case Study 4: Netflix.

7.5. Case Study 5: Port Aventura.

7.6. Case Study 6: exercise Twitter.

7.7. Case Study 7: exercise Asics vs Mizuno.