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Financial statements need to be analyzed in order to fully understand the data presented.  The nature of the analysis depends on the type of financial statement user: 

  • Internal users need to analyze the statements to review past performance and results, to get insight on areas of improvement and to compare their firm to competitors.  
  • External users need to analyze statements in order to determine if they should sell or purchase the firms’ products or services, loan the firm money, invest in the firm, and divest current investments in the firm. 

The course is made up of 10 modules and covers most financial ratios. The course starts with an overview of common size and base year analysis and then explores ratios to analyze liquidity, solvency and leverage. Activity ratios to analyze the quality of assets and operational efficiency are reviewed, followed by analysis of profitability and return ratios. The course ends with a review of market ratios using values per share, earnings and dividends. 

Many of the ratios are illustrated using the FY 2019 financial statements of NIKE Inc. 

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: 

  • Common size and base year analysis. 
  • Liquidity ratios. 
  • Solvency ratios. 
  • Leverage ratios. 
  • Activity ratios. 
  • Profit and return ratios. 
  • Market ratios. 

Course Key Concepts: Financial ratios, common size statements, horizontal analysis, vertical analysis, working capital, current ratio, quick ratio, cash ratio, cash flow ratio, net working capital ratio, capital structure, solvency, leverage, debt to equity ratio, long-term debt to equity ratio, debt to total assets ratio, debt service, debt coverage, interest coverage, fixed charge coverage, operating leverage, financial leverage, accounts receivable turnover, days sales outstanding, inventory turnover, days sales in inventory, operating cycle, cash cycle, gross profit percentage, operating profit percentage, net profit percentage, return on assets (ROA), return on equity (ROE),  book value per share, market to book ratio, basic earnings per share (EPS), diluted earnings per share (EPS), price/earnings ratio (P/E ratio), earnings yield, dividend yield, dividend payout ratio.

 

Learning Objectives

  • Discover how to prepare and analyze common size income statements and balance sheets.
  • Explore the analysis of working capital using ratios, including the current, quick, cash, cash flow and net working capital ratios.
  • Identify capital structure, solvency, and leverage.
  • Explore the analysis of capital structure using ratios, including the debt to equity, long-term debt to equity and debt to total assets ratios.
  • Identify debt service.
  • Explore the analysis of leverage using ratios, including the debt coverage, interest coverage, fixed charge coverage and cash flow to fixed charges ratios.
  • Explore the analysis of operational and financial leverage.
  • Explore the analysis of accounts receivable using accounts receivable turnover and days sales outstanding.
  • Explore the analysis of inventory using inventory turnover and days sales in inventory.
  • Recognize the differences between the operating and cash cycles.
  • Explore the key profitability and return ratios used to analyze income statements and returns on investments.
  • Discover how to analyze and compare publicly traded companies using market ratios including price earnings (P/E), dividend yield and dividend payout.
Last updated/reviewed: June 16, 2020

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Member's Profile
All business professionals, be they in management, accounting, or finance, should have a strong understanding of the key financial ratios discussed in this course.

Prerequisites

Course Complexity: Intermediate

No advanced preparation or prerequisites are required for this course.

 

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
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
INTRODUCTION AND OVERVIEW
  2:52Introduction to Financial Statement Analysis Using Ratios
  19:43Common Size and Base Year Analysis
  quizREVIEW QUESTIONS: Common Size and Base Year Analysis
  18:58Liquidity Ratios
  quizREVIEW QUESTIONS: Liquidity Ratios
  22:47Solvency Ratios - Capital Structure
  15:00Solvency Ratios - Earnings Coverage
  quizREVIEW QUESTIONS: Solvency Ratios - Earnings Coverage
  16:10Leverage Ratios
  quizREVIEW QUESTIONS: Leverage Ratios
  20:16Activity Ratios - Receivables and Inventory
  quizREVIEW QUESTIONS: Activity Ratios - Accounts Receivable and Inventory
  10:14Activity Ratios - Other Balance Sheet Accounts
  quizREVIEW QUESTIONS: Activity Ratios - Other Balance Sheet
  14:52Profit and Return Ratios
  quizREVIEW QUESTIONS: Profit and Return Ratios
  20:11Market Ratios - Values Per Share
  quizREVIEW QUESTIONS: Market Ratios - Values Per Share
  17:35Market Ratios - Earnings and Dividends
  quizREVIEW QUESTIONS: Market Ratios - Earnings and Dividends
Continuous Play
  2:58:48Financial Statement Analysis Using Ratios
Supporting Materials
  PDFSlides: Course Overview
  PDFSlides: Common Size and Base Year Analysis
  PDFSlides: Liquidity Ratios
  PDFSlides: Solvency Ratios: Capital Structure
  PDFSlides: Solvency Ratios: Earnings Coverage
  PDFSlides: Leverage Ratios
  PDFSlides: Activity Ratios: Receivables and Inventory
  PDFSlides: Activity Ratios: Other Balance Sheet Accounts
  PDFSlides: Profit and Return Ratios
  PDFSlides: Market Ratios: Values Per Share
  PDFSlides: Market Ratios: Earnings and Dividends
  PDFSlides: Nike
  PDFFinancial Statement Analysis Using Ratios Glossary/Index
Review And Test
 examFINAL EXAM