Understanding Financial Statements


Overview/Description
Target Audience
Expected Duration
Lesson Objectives
Course Number


Overview/Description
Organisations use financial statements to report their performance and their financial condition to investors and creditors. Managers--including non-financial managers--can use these statements to understand how the organisation is doing: Are any changes needed? Can the organisation improve? How quickly is the organisation growing in comparison with its competitors? Are there any financial danger signs? This course provides a foundation for reading the three key financial statements prepared by most corporations--the balance sheet (or statement of financial condition), the income statement (or earnings statement, or profit and loss statement) and the cash flow statement. The course also explores how to use basic ratios to analyse these financial statements.

Target Audience
Non-financial managers who seek a basic understanding of financial statements

Expected Duration (hours)
3.5

Lesson Objectives

The Balance Sheet

  • recognise the value of understanding a balance sheet.
  • identify examples of assets that appear on a balance sheet.
  • calculate the value of key categories of assets for a balance sheet, given hypothetical financial information.
  • select examples of the types of liabilities reported on a balance sheet.

    • Income and Cash Flow Statements

  • recognise the value of understanding the income statement and the cash flow statement.
  • identify examples of the key elements for calculating gross profit on an income statement.
  • use the key elements to calculate the gross profit for a hypothetical organisation.
  • select examples of the categories of cash from the activities reported on a cash flow statement.
  • calculate the amount of funds using hypothetical cash flow information.
  • match uses of funds with examples.

    • Analysing Financial Ratios

  • recognise the benefits of using ratios to analyse financial statements.
  • match examples of ratio analyses to their purposes.
  • calculate the appropriate ratio analysis data needed to answer specific questions about financial conditions.
  • calculate return on equity, return on sales and gross margin given hypothetical business and financial data.

    • Course Number:
    FIN8154