Common Issues With Financial Ratio Analysis

Financial statements must be analyzed in order to fully understand the data presented. This course identifies common issues that should be considered when analyzing financial statements using financial ratios. Topics include:

• Inherent limitations of financial ratio analysis.
• Trends to consider to determine earnings quality, including the relationships between earnings, receivables, inventory, and cash flow.
• The impact of changes in accounting principles and estimates and the impact of accounting errors.
• Impact of foreign currency fluctuations from translating statements and from specific foreign exchange transactions.
• A short case study of an NYSE traded company that issued fraudulent financial statements that were undetected even though there was limited correlation between earnings and cash flow.

The course content covers Financial Statement Analysis topics tested in the Certified Management Accountant (CMA) Part 2 examination as outlined by the CMA Part 2 exam content specification outline.

Topics include:

• Limitations of ratio analysis
• Earnings quality
• Impact of changes in accounting treatments
• Impact of foreign currency fluctuations

Course Key Contents: Accounting profit, Economic Profit, Opportunity Cost, Accounting Book Value, Market Capitalization, Nominal Values, Real Values, Window Dressing, Collusion, Quality of Earnings Ratio, Accounting Errors, Accounting Estimates, Functional Currency, Reporting Currency, Currency Translations, Cumulative Translation Adjustments (CTA), Foreign Currency Transactions.