COURSE OVERVIEW:

Financial analysis is an aspect of the overall business finance function that involves examining historical data to gain information about the current and future financial health of a company. Financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions. The ability to understand financial data is essential for any business manager. Finance is the language of business. Business goals and objectives are set in financial terms and their outcomes are measured in financial terms. Among the skills required to understand and manage a business is fluency in the language of finance—the ability to read and understand financial data as well as present information in the form of financial reports.

The finance function in business involves evaluating economic trends, setting financial policy, and creating long-range plans for business activities. It also involves applying a system of internal controls for the handling of cash, the recognition of sales, the disbursement of expenses, the valuation of inventory, and the approval of capital expenditures. In addition, the finance function reports on these internal control systems through the preparation of financial statements, such as income statements, balance sheets, and cash flow statements.

Finance involves analysing the data contained in financial statements in order to provide valuable information for management decisions. In this way, financial analysis is only one part of the overall function of finance, but it is a very important one. A company's accounts and statements contain a great deal of information. Discovering the full meaning contained in the statements is at the heart of financial analysis. Understanding how accounts relate to one another is part of financial analysis. Another part of financial analysis involves using the numerical data contained in company statements to uncover patterns of activity that may not be apparent on the surface.

This course describes the key financial analysis techniques that managers can use to make decisions about every aspect of their business. Financial analysis provides valuable tools for decision making. However, managers must still make the decisions.

The first part describes a number of tools that can help managers with decision making. It introduces breakeven analysis, which can be used to evaluate individual products and the product mix. It also explores fixed cost versus variable cost issues within the strategic planning context, such as: Supply chain management, New product strategy and Marketing strategy.

The second part covers return on investment analysis for investment decision making. It explains the principle of discounted cash flow and several methods of analysis that employ it: Internal rate of return, Net present value and Profitability index. It also discusses ways of integrating profitability requirements with company performance targets and methods of planning and evaluating investments, such as: Capital expenditure decisions, R&D analysis and justification, Acquiring other companies, Marketing programs and Strategic alliances.

LEARNING OUTCOMES:

By the end of this course, you will be able to understand:

• The importance of financial analysis
• The analysis of business profitability
• The factors that determines profitability
• The breakeven analysis
• The chart of accounts
• The difference between fixed costs and variable costs
• The development of fixed-cost estimate
• The development of variable-cost estimates
• Why direct labour is a very complex cost to estimate?
• What is meant by other expenses?
• The breakeven calculation
• The price reduction analysis
• The financial analysis solution
• The accounting solution
• The outsourcing opportunity analysis
• The financial strategy for new businesses
• The variance analysis process
• Price versus volume
• Direct material budgeting
• Direct labour budgeting
• Factory overhead expenses
• Administration expenses
• Distribution expenses
• How the analysis of return on investment is a financial forecasting tool?
• what is analysed in ROI?
• The characteristics of investments that should be analysed
• Why are investments analysed so extensively?
• The long-term strategic implications of the forecasting process
• The importance of the discounted cash flow (DCF)
• The types of investments that can be evaluated with the DCF tool
• The principles of discounted cash flow
• The time value of money concept
• The discounted cash flow measures
• The basic premises of discounted cash flow?
• The measures of profitability that can be used to evaluate investments?
• The net present value (NPV)
• The profitability index (PI)
• The internal rate of return
• The payback period
• How investment risk can be incorporated into the ROI analysis?
• What is capital expenditure?
• The cash flow forecast and time frame
• The characteristics of a quality forecast
• The concept of incrementality
• Why the forecast should respect the accounting rules?
• The working capital investment
• Economics versus pricing
• How to establish return on investment target using management by objectives concept?
• The internal rate of return formula
• A comprehensive case study of the entire process of analysing an investment opportunity using the discounted cash flow technique including: sales forecast, forecast income statement, working capital investment and cash flow forecast examples

COURSE DURATION:

The typical duration of this course is approximately 2-3 hours to complete. Your enrolment is Valid for 12 Months. Start anytime and study at your own pace.

COURSE REQUIREMENTS:

You must have access to a computer or any mobile device with Adobe Acrobat Reader (free PDF Viewer) installed, to complete this course.

COURSE DELIVERY:

Purchase and download course content.

ASSESSMENT:

A simple 10-question true or false quiz with Unlimited Submission Attempts.

CERTIFICATION:

Upon course completion, you will receive a customised digital “Certificate of Completion”.