Financial Statements

A 3 day course on Interpreting Financial Statements

This course examines the tools the banker needs to use in order to interpret the financial information that is required in order to undertake a lending decision

Objectives

At the end of this programme all delegates should be able to:

• Read the annual report effectively
  
  
• Undertake spreadsheet analysis
  
  
• Explain the rationale and various uses of ratio analysis
  
  
• Calculate the main categories of ratios
  
  
• Construct a cash flow statement
  
  
• Prepare forecasts and projections
  
  
• Undertake breakeven and sensitivity analysis

Content

The Annual Report:

• Reporting requirements
• Potential users
• Contents
• Tthe need to read first

Spreadsheet Analysis:

• Rationale for spreadsheets
• Which accounts to spread
• A format for spreadsheets
• How to use the spreadsheets as part of the lending decision

Ratio Analysis:

• Uses of ratios
• Sales performance
• Profitability
• Liquidity
• Efficiency
• Gearing and leverage
• Solvency
• Return on equity ( Du Pont approach)

Cash Flow Statements:

• Reporting requirements
• Construction in accordance with IAS 7 format
• Interpretation
• Cash flow ratios

Projections:

• Types of projections
• Budgets versus forecasts
• How prepared in practice
• How the banker can construct them
• How to evaluate them.

Break-even and Sensitivity Analysis:

• Break-even levels using sales and gross margins
• Break-even using unit contribution
• Use of sensitivities
• Key areas to sensitise
• Establishing key vulnerabilities