Instructor for this course

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.

Learning Objectives

  • Explore the major limitations of ratio analysis.
  • Recognize the differences between accounting profit and economic profit and between book value and market value.
  • Identify the determinants and limitations of earnings quality.
  • Explore the relationships between earnings, cash flow, receivables, and inventory.
  • Describe how to adjust financial statements for changes in accounting treatments.
  • Recognize functional currency, reporting currency, and transaction currency.
  • Identify the differences between foreign currency translations and foreign currency transactions.
  • Identify the treatment of transaction and translation gains and losses.
Last updated/reviewed: May 26, 2022

5 Reviews (19 ratings)Reviews

Anonymous Author
Excellent overview of issues to be aware of when analyzing financial statements using financial ratios,
Member's Profile
Focuses on the limitations of financial ratios. Good follow up to courses on calculating ratios.
Member's Profile
Well presented, easy to follow, not dull. Informative and relevant.
Anonymous Author
Great slides to use as reference. Would recommend to others.
Member's Profile
Very well organized and very clear in the instruction.


Course Complexity: Intermediate

No advanced preparation or prerequisites are required for this course.


Education Provider Information

Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
  1:44Introduction to Common Issues With Financial Ratio Analysis
  11:01Limitations of Ratio Analysis
  9:46Limitations of Ratio Analysis Continued
  14:19Earnings Quality
  17:40Impact of Changes in Accounting Treatments
  12:44Impact of Foreign Exchange Fluctuations
Continuous Play
  1:07:14 Common Issues With Financial Ratio Analysis
Supporting Materials
  PDFSlides: Common Issues With Financial Ratio Analysis
  PDFCommon Issues With Financial Ratio Analysis Glossary/Index
Review And Test