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Understanding How To Read A Balance Sheet & Income Statement
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Course Overview
This 40-hour course is designed for business owners, managers, investors, and professionals seeking to understand, interpret, and analyze financial statements. Participants will learn how to read key financial reports, understand accounting data, and apply analytical tools to assess a company’s financial health.
Course Modules
Module 1
2 hours
Introduction to Financial Statements
Purpose of Financial Statements - Types of Financial Statements - Users and Uses of Financial Information
Objectives: Understand the basics of financial reporting.
Assessment: Quiz on statement types and purposes.
Module 2
4 hours
Overview of the Income Statement
Structure of the Income Statement - Revenues, Expenses, and Net Income - Gross Profit, Operating Income, and Net Profit Margins
Objectives: Interpret components of the income statement.
Assessment: Exercises on interpreting income statements.
Module 3
4 hours
Understanding the Balance Sheet
Assets, Liabilities, and Equity - Current vs. Non-Current Items - Understanding Liquidity and Solvency
Objectives: Read and analyze balance sheets.
Assessment: Case studies on balance sheet analysis.
Module 4
4 hours
Cash Flow Statement Essentials
Operating, Investing, and Financing Activities - Direct vs. Indirect Method - Importance of Cash Flow in Business Health
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Objectives: Understand cash flow statement components.
Assessment: Cash flow classification exercises.
Module 5
3 hours
Statement of Changes in Equity
Share Capital and Retained Earnings - Dividends and Other Changes - Comprehensive Income
Objectives: Interpret equity movements within a company.
Assessment: Exercises on changes in equity.
Module 6
4 hours
Key Financial Ratios and Metrics
Profitability Ratios (ROE, ROA, Profit Margins) - Liquidity Ratios (Current Ratio, Quick Ratio) - Solvency Ratios (Debt to Equity, Interest Coverage) - Efficiency Ratios (Inventory Turnover, Receivables Turnover)
Objectives: Calculate and interpret financial ratios.
Assessment: Ratio calculation problems.
Module 7
3 hours
Trend and Horizontal Analysis
Comparing Financial Statements Over Time - Identifying Growth Trends and Red Flags
Objectives: Apply trend and horizontal analysis techniques.
Assessment: Practice analyzing multi-year statements.
Module 8
3 hours
Common-Size and Vertical Analysis
Preparing Common-Size Statements - Analyzing Percentage Relationships within Statements
Objectives: Perform vertical analysis for better comparability.
Assessment: Common-size statement preparation.
Module 9
3 hours
Interpreting Financial Statements for Decision Making
Identifying Business Strengths and Weaknesses - Linking Financial Data to Strategic Decisions - Stakeholder Perspectives
Objectives: Make informed decisions based on financial analysis.
Assessment: Business case analysis.
Module 10
3 hours
Red Flags and Warning Signs in Financial Reports
Earnings Manipulation and Red Flags - Unusual Trends in Cash Flow or Margins - Financial Distress Indicators
Objectives: Spot potential accounting anomalies.
Assessment: Case studies on detecting financial red flags.
Module 11
2 hours
Industry-Specific Financial Insights
Differences in Financials Across Industries - Sector-specific Metrics and Benchmarks
Objectives: Adjust analysis techniques for industry nuances.
Assessment: Industry-based financial analysis.
Module 12
5 hours
Final Project and Course Review
Comprehensive Analysis of a Real Company - Interpretation of Full Set of Financial Statements - Final Assessment and Feedback
Objectives: Synthesize course concepts in a practical setting.
Assessment: Final project submission.