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Training FUTURUM : FINANCIAL STATEMENTS ANALYSIS, Jakarta
- 1. FINANCIAL STATEMENTS ANALYSIS TIME TOPUT OUR ACCOUNTING HAT ON!
- 2. Introduction The process offinancial reporting, financial statement analysis, and valuation is intended to help investors and analysts to deeply understand a firm’s profitability and risk and to use that information to forecast future profitability and risk and ultimately value the firm, enabling intelligent investment decisions. This process lies at the heart of the role of accounting, financial reporting, capital markets, investments, portfolio management, and corporate management in the world economy.
- 3. “Big Picture” Frameworkfor Analysis
- 4. Overview of FinancialStatement Analysis Step 3: Assess the Quality of the Financial Statements Accounting Principles Balance Sheet—Measuring Financial Position Income Statement—Measuring Operating Performance Statement of Cash Flows Important Information with the Financial Statements Summary of Financial Statements, Notes, MD&A, and Managers’ and Auditors’ Attestations Step 4: Analyze Profitability and Risk Tools of Profitability and Risk Analysis Step 1: Identify the Industry Economic Characteristics Tools for Studying Industry Economics Value Chain Analysis Porter’s Five Forces Classification Framework Economic Attributes Framework Step 2: Identify the Company Strategies Framework for Strategy Analysis
- 5. Asset and LiabilityValuation and Income Recognition Introduction to the Mixed Attribute Accounting Model Asset and Liability Valuation Historical Value: Acquisition Cost Historical Value: Adjusted Acquisition Cost Historical Value: Initial Present Value Current Values: Fair Value Current Values: Fair Value Based on Current Replacement Cost Current Values: Fair Value Based on Net Realizable Value Income Recognition Approach 1: Economic Value Changes Recognized on the Balance Sheet and Income Statement When Realized Approach 3: Economic Value Changes Recognized on the Balance Sheet and the Income Statement When They Occur Approach 2: Economic Value Changes Recognized on the Balance Sheet When They Occur but Recognized on the Income Statement When Realized
- 6. Asset and LiabilityValuation and Income Recognition Income Taxes Overview of Financial Reporting of Income Taxes Measuring Income Tax Expense: A Bit More to the Story (to Be Technically Correct) Reporting Income Taxes in the Financial Statements Framework for Analyzing the Effects of Transactions on the Financial Statements Overview of the Analytical Framework Summary of the Analytical Framework
- 7. Income Flows versusCash Flows: Understanding the Statement of Cash Flows Understanding the Relations among Net Income,Balance Sheets, and Cash Flows The Relations among Cash Flows from Operating, Investing, and Financing Activities The Relation between Cash Balances and Net Cash Flows The Operating Section of the Statement of Cash Flows The Relation between Net Income and Cash Flow from Operations Aside: Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) Preparing the Statement of Cash Flows Algebraic Formulation Classifying Changes in Balance Sheet Accounts Illustration of the Preparation Procedure Using the Statement of Cash Flows to Assess Earnings Quality
- 8. Profitability Analysis Overview ofProfitability Analysis Earnings Per Share (EPS) Calculating EPS Criticisms of EPS Common-Size Analysis Percentage Change Analysis Alternative Definitions of Profits Comprehensive Income Operating Income, EBIT, EBITDA, and Other Profit Measures Segment Profitability Pro Forma, Adjusted, or Street Earnings Rate of Return on Assets (ROA) Two Comments on the Calculation of ROA Disaggregating ROA Economic and Strategic Factors in the Interpretation of ROA Analyzing the Profit Margin for ROA Analyzing Total Assets Turnover Supplementing ROA in Profitability Analysis Rate of Return on Common Shareholders’ Equity (ROCE) Benchmarks for ROCE Relating ROA to ROCE Disaggregating ROCE Interpreting Financial Statement Ratios Comparisons with Earlier Periods Comparisons with Other Firms
- 9. Risk Analysis Analyzing Short-TermLiquidity Risk Current Ratio Quick Ratio Operating Cash Flow to Current Liabilities Ratio Working Capital Turnover Ratios Revenues to Cash Ratio Days Revenues Held in Cash Summary of Short-Term Liquidity Risk Disclosures Regarding Risk and Risk Management Firm-Specific Risks Commodity Prices Financial Statement Analysis of Risk Analyzing Financial Flexibility: Alternative Approaches to Disaggregate ROCE Summary of Financial Flexibility Analyzing Long-Term Solvency Risk Debt Ratios Interest Coverage Ratios Operating Cash Flow to Total Liabilities Ratio Summary of Long-Term Solvency Risk Analyzing Credit Risk Circumstances Leading to Need for the Loan Credit History Cash Flows Collateral Capacity for Debt Contingencies Character of Management Communication Conditions or Covenants Summary of Credit Risk Analysis
- 10. Risk Analysis Market EquityBeta Risk Financial Reporting Manipulation Risk Motivations for Earnings Manipulation Empirical Research on Earnings Manipulation Application of Beneish’s Model to a company Summary of Earnings Manipulation Risk
- 11. Financing Activities Equity Financing Investments by Shareholders: Common Equity Issuance Distributions to Shareholders: Dividends Distributions to Shareholders: Share Repurchases Equity Issued as Compensation: Stock Options Fair Value Method and Required Disclosures Net Income, Retained Earnings, Accumulated Other Comprehensive Income, and Reserves Summary and Interpretation of Equity Debt Financing Principles of Liability Recognition Principles of Liability Valuation Application of Criteria for Liability Recognition Contingent Obligations Financing with Long-Term Debt Financial Reporting of Long- Term Debt Measuring Fair Value Reducing Debt Troubled Debt Additional Issues in Liability Recognition and Debt Financing Hybrid Securities Off-Balance-Sheet Financing Arrangements Leases Operating Lease Method Capital Lease Method Choosing the Accounting Method Converting Operating Leases to Capital Leases Impact of Accounting for Operating Leases as Capital Leases
- 12. Investing Activities Investments inLong-Lived Operating Assets Are the Acquisition Costs “Assets”? What Choices Are Managers Making to Allocate Acquisition Costs to the Periods Benefited? What Is the Relationship between the Book Values and Market Values of Long- Lived Assets? When Will the Long-Lived Assets Be Replaced? Investments in Securities Percentage of Ownership Minority, Passive Investments Minority, Active Investments Majority, Active Investments Consolidation of Unconsolidated Subsidiaries and Affiliates Joint Ventures: Proportionate Consolidation of Unconsolidated Subsidiaries and Affiliates
- 13. Operating Activities Accomplishments (RevenueRecognition) Criteria for Revenue Recognition Application of Revenue Recognition Criteria Revenue Recognition at the Time of Sale (Delivery) Delaying Revenue Recognition When Substantial Performance Remains Income Recognition under Long-Term Contracts Revenue Recognition When Cash Collectability Is Uncertain Investment in Working Capital: Accounts Receivable and Deferred Revenues Efforts (Expense Recognition) Criteria for Expense Recognition Cost of Sales Reporting Changes in the Fair Market Value of Inventory Accounting Quality: Cost of Sales and Inventory Investment in Working Capital: Inventory and Accounts Payable SG&A (Selling, General, and Administrative) Costs Operating Profit
- 14. Accounting Quality Accounting Quality High Quality Reflects Economic Information Content High Quality Leads to Earnings Persistence over Time Specific Events and Conditions That Affect Earnings Quality Discontinued Operations Extraordinary Gains and Losses Changes in Accounting Principles Other Comprehensive Income Items Impairment Losses on Long-Lived Assets Restructuring and Other Charges Changes in Estimates Gains and Losses from Peripheral Activities Summary of Accounting Data Adjustments Restated Financial Statement Data Accounting Classification Differences Financial Reporting Worldwide Earnings Management Incentives to Practice Earnings Management Disincentives to Practice Earnings Management Boundaries of Earnings Management
- 15. Training Desktop Date: see at the website “futurum corfinan” (3-day training) Venue : Hotel at Jakarta Pusat Note : Presentation slides will be distributed in softcopy Minimum participants = 10 persons After the training, participants are allowed to discuss about the training materials via email in the website Contact email : futurumcorfinan@gmail.com Visit Website and Training Testimonials : google “futurum corfinan”