Unit 5: Financial Reporting and Financial Statement Analysis
In this unit, you will learn about financial reporting and examine the financial statements of a public company. Public companies are required to file their financial statements with the SEC on a quarterly and annual basis. The SEC has a standard format for presenting financial information that helps us read and interpret financial information. Understanding financial reports can help you in a variety of important ways: judging the financial health of the company you work for, looking into investment options, analyzing a potential vendor, customer, or partner, and even considering employment options. Knowing how to read and analyze financial statements is a must for anyone in business.
Completing this unit should take you approximately 6 hours.
Upon successful completion of this unit, you will be able to:
- conduct horizontal and vertical analyses of a company's financial statements;
- calculate key ratios from financial statement data including liquidity, profitability, efficiency, and leverage ratios;
- analyze competitor and industry data for financial comparisons; and
- interpret results of financial analyses to make decisions.
5.1: Financial Reporting
This video is a reminder of what the 4 basic financial statements contain - the Income Statement, Balance Sheet, Statement of Retained Earnings, and Cash Flow Statement.
Read these remarks from a former SEC Commissioner, which goes behind the scenes to discuss issues of reporting financial information for public companies. GAAP is integral in reporting transactions.
This is a great introduction to resources that you can use to research any public company. All public companies must report their financials; quarterly reports, end of year tax forms, changes in top management, and so on. If you ever need to look up a company, this will give you the tools you need to navigate the public records system.
Although learning how to read a report sounds daunting, you might be surprised at how much valuable information they offer.
5.2: Financial Statement Analysis
Read this chapter, which discusses how to analyze financial statements and demonstrates the use of ratios and the horizontal and vertical analysis tools that everyone from creditors to investors, vendors, and top management use when they want to identify the strengths and weaknesses in an organization. Analysis tools can help you compare companies of different sizes, companies in different industries, and the same company over time.
This video, and the others that follow, will provide demonstrations of how to perform various aspects of financial statement analysis. These brief videos can help make learning the calculations very simple and save you a lot of time. This first video will describe how to do vertical analysis for financial statements.
- This video will show how to use what you learned doing vertical analysis to compare companies of different sizes. This is most useful for benchmarking your company against its competitors.
- This video will describe how to do horizontal anlaysis for financial statements.
- This video will describe how to do ratio analysis for financial statements. The following series of videos will show examples of how to calculate a few of the many ratios you can use to analyze a firm's financial health. Ratios allow for comparison of companies of different sizes and at different points in time.
Unit 5 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.