Financial Statement Analysis

Accrual accounting · accounting equation · why ratios compare size · the three statements · policies and notes · auditor’s report

1. Accrual accounting — recording when it happens, not when cash moves
2. The accounting equation as a check on every statement
3. Why ratios remove size — a shop and a chain side by side
4. The three statements — what each one tells you
5. Finding the key lines in a real annual report
6. One sale followed through all three statements
7. Accounting policies — why the same event can show different numbers
8. Finding policies, notes and the auditor’s report in a filed report
9. A note that changes how a ratio should be read

Vertical analysis · horizontal analysis · growth rates · one-off versus lasting · adjusted figures

1. Vertical analysis — every line as a share of one base
2. Building common-size statements in a spreadsheet
3. Reading the structure of a retailer’s income statement
4. Horizontal analysis — change and growth across periods
5. A multi-period trend table in a spreadsheet
6. One-off jump or lasting trend — a worked example
7. Non-recurring items — what they are and why they distort
8. Finding one-offs in the notes and adjusting a statement
9. Reported versus adjusted margin — a worked example

Current and quick ratios · inventory and receivable quality · turnover and days · debt to equity · interest coverage

1. Liquidity — can the company pay what it owes soon?
2. Computing current and quick ratios from a balance sheet
3. A healthy ratio hiding slow stock and late customers
4. Efficiency — how fast assets turn into sales and cash
5. Efficiency ratios on a worksheet
6. The cash cycle of a trading company — a worked example
7. Leverage — how debt adds return and risk
8. Debt to equity and interest coverage from filed statements
9. Two companies, same profit, different debt

Gross, operating and net margin · ROA · ROE · ROE breakdown · earnings per share

1. Profitability — margins and returns, and what they measure
2. Margin and return ratios on a worksheet
3. Net margin fell while gross margin held — a worked example
4. The three drivers of ROE
5. Splitting ROE into its three parts in a spreadsheet
6. Same ROE, different route — a worked example
7. Earnings per share — what it is and what moves it
8. Calculating EPS when the share count changes
9. EPS up, business unchanged — a worked example

Cash-flow ratios · profit versus operating cash · cash conversion · red flags · follow-up questions

1. Cash-flow ratios — what OCF/EBITDA and FCF/debt measure
2. Building cash-flow ratios from the cash-flow statement
3. Strong profit, weak cash generation — a worked example
4. Earnings quality — why profit and cash should travel together
5. Tracking the gap between net income and operating cash flow
6. A gap that widens for three periods — a worked example
7. Red flags — what they are and why each one matters
8. A red-flag checklist with a follow-up question for each
9. Receivables outgrow revenue as borrowing rises — a worked example

Ratio workbook · linked formulas · consistency checks · peers and prior periods · limits of ratios

1. How a ratio workbook is built — inputs, ratios, outputs
2. Linked ratios and consistency checks in a spreadsheet
3. A consistency check that catches a data-entry error
4. Benchmarking — choosing peers and periods that compare fairly
5. Pulling peer data from public reports into the workbook
6. Explaining a gap between two peers — a worked example
7. Why ratios can mislead — policies, year-ends and seasonality
8. Average versus year-end balances — recalculating in a spreadsheet
9. Same company, different year-end, different ratio — a worked example

Chart types · clear units · dashboards · conclusion-first reports · follow-up questions · objective tone

1. Choosing the right chart for the message
2. A clean ratio chart and a one-page dashboard
3. The same data, a poor chart and a good chart
4. The shape of a management report — conclusion, evidence, questions
5. A one-page management report template
6. From a ratio table to three clear sentences — a worked example
7. Objectivity — showing bad news as clearly as good news
8. Stating data sources and limits in a report
9. Rewriting a one-sided summary into a balanced one

Multi-period analysis · profit versus cash case · conclusions · corporate finance · valuation · advanced reporting

1. Planning a full analysis — questions, periods, steps
2. Running the workbook on one company across several periods
3. Presenting conclusions on liquidity, leverage, profitability and cash
4. Why reported profit and cash can move apart
5. A case template — profit and cash on one timeline
6. A growing company with rising profit and falling cash
7. Statement analysis as the first step of corporate finance
8. From ratios to valuation — the inputs an analyst takes from statements
9. A finding that points to advanced financial reporting