Financial Analysis Course
This page contains our free online financial statement analysis course. It will teach you the basics of financial analysis, including examples of using it.
The Course Covers:
-
The Fundamentals of Financial Statements
-
How to Analyse Financial Statements
-
Key Financial Ratios and Formulas
-
Examples of financial analysis in action
Course Modules:
-
Lesson 1: Financial Analysis Introduction
-
Lesson 2: Common Formulas & Ratios
-
Lesson 3: Analysing Financial Statements
To start the online course, scroll down.
This course is FREE, and no registration is required. It is perfect for start-up businesses and companies looking for financing.
Jump to:
An Introduction to Financial Analysis
Financial Statement Analysis Made Easy
Part 1: An Introduction to Financial Analysis
Module overview:
-
Course Introduction
-
Course Overview
-
Course Aim
-
And more
What are financial statements?
In accounting and finance, financial statements are any reports that display a business or company's financial health (sales, expenses or profits) or financial position (assets, liabilities or equity). Generally, financial statements refer to two specific financial reports: the profit and loss statement and the balance sheet.
Sometimes, the profit and loss statement is called the statement of comprehensive income. Sometimes, the balance sheet is called the statement of financial position.
Take my free accounting course to learn the basics of the profit and loss statement and balance sheet.
Who should learn to analyse financial statements?
Reading, understanding and analysing financial statements is a handy skill.
Those who would find this helpful skill include:
-
Business owners
-
Company directors
-
Business students
-
Accounting students
-
Bookkeepers
-
Accountants
-
Entrepreneurs
-
Shareholders and investors
-
Stock traders and investors
Part 2: Financial Formulas and Ratios
Module overview:
-
Company accounts
-
Comparing financial information
-
Common financial formulas
-
Common financial ratios
Common Financial Formulas and Financial Ratios
Below are the most basic and commonly used formulas used for financial analysis:
Gross Profit
Evaluate how much gross profit is generated from sales
Gross profit margin = gross profit/total sales
Gross Profit Percentage
Gross profit margin as percentage = (gross profit/total sales)*100
Net Profit
Evaluate how much gross profit is generated from sales
Net profit margin = gross profit/total sales
Net Profit Percentage
Net profit margin as percentage = (gross profit/total sales)*100
Current Ratio
Calculate a company's ability to pay off short-term liabilities with the company's assets.
Current ratio = current assets/current liabilities
Acid Test Ratio
Calculate a company's ability to pay off short-term liabilities with liquid assets.
Acid test ratio = liquid assets/current liabilities
Days Sales Outstanding (DSO)
Measure the average number of days it takes for the company to collect payment from credit sales. DSO can also be called 'collection period' or 'receivable turnover in days'.
DSO = (debtors balance/total credit sales)*365
Days Payable Outstanding (DPO)
Measure the average number of days it takes for the company to pay its credit suppliers. DPO can also be called 'payment period' or 'accounts payable turnover in days'.
DPO = (creditors balance/total credit purchases)*365
Part 3: Financial Analysis Example
Module overview:
-
Analysis of the profit and loss statement
-
Analysis of the balance sheet
A Complete List of other Financial Formulas and Financial Ratios
Financial Formulas for Profitability
Return on assets
Also known as return on investment. Used to evaluate a company's efficiency to generate sales from its assets.
ROA = net profit/total assets
Return of shareholders' equity
Measure the income derived from shareholders' equity.
Return of shareholders equity = net profit/shareholders equity
Financial Formulas for Liquidity
Cash ratio
Analyse a company's ability to pay off short-term liabilities with company cash.
Cash ratio = cash/current liabilities
Net working capital
Determine if a company can meet its current liabilities with its current assets.
Net working capital = current assets - current liabilities
Financial Formulas for Management Efficiency
Inventory turnover
Measure how many times inventory is sold and replaced.
Inventory turnover ratio = cost of sales/inventory
Days inventory outstanding
Measure how many days inventory is in the warehouse before the sale.
Days inventory outstanding = 365/inventory turnover
Operating cycle
Calculate the days the company takes to complete one operating cycle, i.e., pay for purchases, sell them and collect the revenue from the sale.
Operating cycle = days inventory outstanding/days sales outstanding
Financial Formulas for Leverage
Debt ratio
Measure the amount of company assets that are financed by debt.
Debt ratio = total liabilities/total assets
Equity ratio
Measure the amount of company assets that are financed by owners' equity.
Equity ratio = total equity/total assets
Financial formulas for valuation and growth
Earnings per share(EPS)
Calculate the rate of earnings per company share.
EPS = (net profit-dividends)/company shares
Suggested video:
Improving company cash flow!
Ready to take accounting more seriously?
Take bookkeeping and accounting to the next level by enrolling in the Bookkeeping Master's Ultimate Bookkeeping Course
Gain a certificate of completion
Learn bookkeeping and accounting for limited companies
Learn how to create year-end accounts
Learn advanced accounting principles