Financial Statement Analysis-Reading the Numbers Correctly!
The session will begin with a brief review of the four basic financial statements: Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flows. Additionally, the “types” or quality of financial statements will be covered, including company-prepared, compiled, reviewed, and audited. The notes to the financial statements will also be highlighted. The participant will then be introduced to a “five-part” financial statement analysis model covering Liquidity, Activity, Leverage, Operating Performance, and Cash Flow. The Liquidity section will illustrate how to calculate the “true” cash position of the company. The Activity section will include accounts receivable, accounts payable, inventory turnover, and the “cash conversion cycle.” The Leverage section will review the debt-to-equity model and the impact of a subordination agreement. The Operating Performance section will review how to gauge the company’s “true” profitability. The Cash Flow section will show how to determine the company’s “traditional” EBITDA, fixed-charged coverage, cash basis cash flow, and uniform credit analysis cash flow. Additionally, a brief overview of both the Z-score (bankruptcy predictor) and sustainable growth models will be provided. Case studies will be presented to illustrate the main concepts associated with financial statement analysis and will clarify this often-challenging subject.
