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Introduction to Financial Analysis

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Introduction to Financial Analysis

Financial Analysis, by and large, incorporates Accounting concepts. Thus, it is imperative that the analyst understand the numbers, which s/he will utilize in his/her analysis. This text exposes the reader to the many shortcomings in reading Financial Statements. No prior knowledge of Accounting is assumed. The text will lead the reader through the arcane world of Accounting and point out the many shortcomings in reading the statements and in conducting elementary Financial Analysis.

FinanceBusiness
Author
Kenneth S. Bigel
Publisher
Touro University
Source
LibreTexts
License
CC BY
Language
EN
Category
Economics
Read online Download PDF (open licence)
Contents· 183 sections
  1. 01: Part I. Financial Statements and Ratio Analysis and Forecasting
  2. 01: Introduction
  3. 1.01: Chapter One- Learning Outcomes
  4. 1.02: The Corporation
  5. 1.03: Business Corporate Structure- The Management Organization
  6. 1.04: The Finance Function Within the Corporation
  7. 1.05: Capital Structure
  8. 1.06: Thinking Like an Economist-Abstraction
  9. 1.07: Abstraction- Absurd AND Necessary
  10. 1.08: Modes of Reasoning- Dialectical versus Analytic
  11. 1.09: Finance Style
  12. 02: Financial Statements Analysis- The Balance Sheet
  13. 2.01: Chapter Two- Learning Outcomes
  14. 2.02: The Finance in the Financial Statements
  15. 2.03: The Balance Sheet
  16. 2.04: Sample Bookkeeping Entries
  17. 2.05: Current Assets - Inventory and Accounts Receivable
  18. 2.06: Financial Claims Hierarchy
  19. 2.07: Interest Paid on Bonds and Dividends Paid on Stock
  20. 2.08: Bankruptcy
  21. 2.09: The Balance Sheet Net Income and the Common Shareholder
  22. 2.10: Corporate Goals
  23. 2.11: Words and Numbers (An Aside)
  24. 2.12: Chapter 2 Review Questions
  25. 03: Financial Statements Analysis- The Income Statement
  26. 3.01: Chapter Three- Learning Outcomes
  27. 3.02: The Income Statement
  28. 3.03: On Learning and Studying
  29. 3.04: Financial Statements- Interpretation
  30. 3.05: The Audit
  31. 3.06: Perpetual InventoryAccounting
  32. 3.07: Periodic Inventory Analysis- Ending Inventory and Cost of Goods Sold
  33. 3.08: Units to Numbers- FIFO and LIFO
  34. 3.09: Inventory Costing Calculations- A Closer Look at the COGS and Ending Inventory Computations
  35. 3.10: Inventory Accounting Issues- LIFO
  36. 3.11: LIFO Base Illustration
  37. 3.12: Accounting for Long-term Assets- Straight-Line Depreciation (For Reporting Purposes Only)
  38. 3.13: Accounting Entries for Depreciation
  39. 3.14: Accelerated DepreciationMethods- Sum-of-the-Years' Digits (For reporting purposes only)
  40. 3.15: Accelerated Depreciation Methods- Double Declining Balance (For reporting purposes only)
  41. 3.16: Comparative Summary of Depreciation Methods
  42. 3.17: The Balance Sheet versus the Income Statement- A Summary
  43. 3.18: Chapter Three- Review Questions
  44. 04: Financial Statements and Finance
  45. 4.01: Chapter Four- Learning Outcomes
  46. 4.02: Accounting versus Finance
  47. 4.03: Earnings Management- Accrual Real and Expectations Management
  48. 4.04: Business Ethics- Examples of Fraudulent Revenue Recognition
  49. 4.05: Business Ethics- Examples of Fraudulent Expense Recognition
  50. 4.06: Chapter 4- Review Questions
  51. 02: Part II- Ratio Analysis and Forecasting Modeling
  52. 05: Financial Ratios and Forecasting Liquidity and Solvency Ratios
  53. 5.01: Chapter Five- Learning Outcomes
  54. 5.02: Financial Ratiosand Forecasting
  55. 5.03: Financial Ratios
  56. 5.04: Longitudinal vs. Cross-sectional Analysis (Example)
  57. 5.05: Liquidity and Liquidity Ratios
  58. 5.06: The Income Statement versus the Balance Sheet
  59. 5.07: Accounts Receivable Aging Schedule
  60. 5.08: Solvency Ratios
  61. 06: Profitability and Return Ratios and Turnover
  62. 6.01: Chapter Six- Learning Outcomes
  63. 6.02: Profitability Return and Asset Turnover Ratios
  64. 6.03: The DuPont Model
  65. 6.04: What Doesthe Dupont Model Show Us
  66. 6.05: Financial Ratios in Action
  67. 07: Market Ratios
  68. 7.01: Chapter Seven- Learning Outcomes
  69. 7.02: Market Ratios
  70. 7.03: Earnings Retention and Growth
  71. 7.04: TheP BV andP E Ratios
  72. 7.05: Ratio Analysis Exercise
  73. 7.06: Solution Template for Ratio Analysis Problem
  74. 7.07: Solution for Ratio Analysis Problem
  75. 7.08: Adjustments to Basic Financial Ratios for Companies That Have Preferred Stock
  76. 7.09: Exhibit of Effect of Preferred Stock on Earnings Retention
  77. 7.10: Industry Data Benchmarks
  78. 7.11: Some Limitations of Financial Ratios
  79. 7.12: Chapters5 - 7-Review Questions
  80. 08: Cash Flow Depreciation and Financial Projections
  81. 8.01: Chapter Eight- Learning Outcomes
  82. 8.02: Pro Forma Financial Analysis- The Corporate Environment
  83. 8.03: Pro-Forma(Projected)Cash Flow Analysis
  84. 8.04: Incrementalism
  85. 8.05: Corporate Forecasting and Strategic Planning
  86. 8.06: Forecasting Solution
  87. 8.07: The Tax Effect of Depreciation
  88. 09: Corporate Forecasting Models
  89. 9.01: Chapter Nine- Learning Outcomes
  90. 9.02: Free Cash Flow
  91. 9.03: Free Cash Flow Exercises
  92. 9.04: External Funds Needed Formula(EFN)
  93. 9.05: Internal and External Funds (Summary)
  94. 9.06: The EFN Formula Explained
  95. 9.07: EFN Application
  96. 9.08: EFN Solution
  97. 9.09: Summary- The Fundamentals of Accounting and Financial Analysis
  98. 9.10: Chapters Eight and Nine-Review Questions
  99. 03: Part III- The Time Value of Money
  100. 10: The Time Value of Money- Simple Present- and Future-Values
  101. 10.01: Chapter Ten- Learning Outcomes
  102. 10.02: The Time Value of Money and Interest
  103. 10.03: Interest-on-the-Interest- The Nature of Compound Interest
  104. 10.04: Some More Simple TVM Problems
  105. 10.05: Simple Future and Present Values (Formulas)
  106. 10.06: Compounding Frequency Assumption
  107. 10.07: Simple Future and Present Values- Continuous Compounding (Supplemental)
  108. 10.08: Characteristics of the Time Value of Money- FV and PV
  109. 10.09: Future and Present Value Factors (Multipliers)
  110. 10.10: A Word on Compounding Frequency and Annual Equivalent Rates
  111. 10.11: Interpolation
  112. 10.12: Interpolation Illustrated
  113. 10.13: Some TVM Practice Questions
  114. 10.14: The Volatility of the Time Value of Money
  115. 10.15: The First and Second Derivatives Illustrated
  116. 11: The Time Value of Money- Annuities Perpetuities and Mortgages
  117. 11.01: Chapter Eleven- Learning Outcomes
  118. 11.02: Annuities
  119. 11.03: The Derivation of (Ordinary) Annuity Factors
  120. 11.04: The Derivation of Annuity Factors (Solution)
  121. 11.05: Future and Present Annuity Values- The Nature of Their Cash Flows
  122. 11.06: Future and Present Annuity Factors- Mathematical Formulas
  123. 11.07: Characteristics of Annuity Factors- A Review
  124. 11.08: Annuities- Practice Problems
  125. 11.09: Annuities Due
  126. 11.10: Annuities Due (Solutions)
  127. 11.11: Adjustment from Ordinary Annuity to Annuity Due
  128. 11.12: Uneven Cash Flows
  129. 11.13: Uneven Cash Flows (Solutions)
  130. 11.14: Uneven Cash Flows (Practice Problem)
  131. 11.15: Uneven Cash Flows (Practice Problem Solutions)
  132. 11.16: Uneven Cash Flows- Another Self-Test Practice Problem
  133. 11.17: Solution to Another Uneven Cash Flow Practice Problem
  134. 11.18: Perpetuities- No-Growth Perpetuities
  135. 11.19: The Law of Limits and Perpetuities
  136. 11.20: Growth Perpetuities
  137. 11.21: Fractional Time Periods
  138. 11.22: Loans- The Conventional Mortgage
  139. 11.23: A Few Thoughts about Mortgages
  140. 11.24: Summary Comparison of 15- and 30-Year Mortgages
  141. 11.25: Personal Financial Planning Problem
  142. 11.26: Summary- The Time Value of Money
  143. 11.27: Chapters 10 - 11- Review Questions
  144. 04: Part IV Interest Rates Valuation and Return
  145. 12: Fixed Income Valuation
  146. 12.01: Chapter Twelve- Learning Outcomes
  147. 12.02: Security Return- The Holding Pattern Return (Raw Calculation)
  148. 12.03: Valuation Premise
  149. 12.04: Fixed Income Securities- Bond Components and Valuation Formula
  150. 12.05: Fixed Income Securities- Dollar Price and Yield-to-Maturity
  151. 12.06: Bond Dollar Prices- Discount Par and Premium
  152. 12.07: The True Price of a Bond
  153. 13: Interest Rates
  154. 13.01: Chapter Thirteen- Learning Outcomes
  155. 13.02: Interest Rates- Returns to Investors Cost to the Corporation
  156. 13.03: Inside the Bankers Brain
  157. 13.04: Fixed Income Risks
  158. 13.05: Interest Rate and Reinvestment Rate Risks
  159. 13.06: Credit Ratings
  160. 13.07: The Yield Curve
  161. 13.08: The Term Structure of Interest Rates- Four Yield Curve Theories
  162. 13.09: Credit Spreads
  163. 13.10: High Yield Securities- Junk Bonds and Other Speculative Securities
  164. 13.11: Summary- Interest Rates the Corporation and Financial Markets
  165. 14: Equity Valuation and Return Measurement
  166. 14.01: Chapter Fourteen- Learning Outcomes
  167. 14.02: The Philosophy of Equity Valuation
  168. 14.03: Equity Valuation
  169. 14.04: The Dividend Discount Model (DDM)- Fixed Dividend or No- Growth Version
  170. 14.05: The Dividend Discount Model (DDM)- Constant Growth Version
  171. 14.06: Dividend Discount Model (DDM) (Problems)
  172. 14.07: Dividend Discount Model (Solutions)
  173. 14.08: What About Quarterly Dividends
  174. 14.09: Components of the Dividend Discount Model
  175. 14.10: A Closer Look at Dividend Growth
  176. 14.11: Summary of DDM Variables' Sources
  177. 14.12: Value Prediction Problem
  178. 14.13: A Qualitative Look at The Discount Rate
  179. 14.14: Business Ethics - The Small Investor's Experience of Insider Trading
  180. 14.15: Capital Gains
  181. 14.16: Portfolio Return (Weighted Averages)
  182. 14.17: The Geometric Average Return- Multi-year Returns
  183. 14.18: Chapters 12-14- Review Questions