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A Manager's Guide to Financial Analysis

by Eliot H. Sherman

September 2015

Beginner

252 pages

English

AMA Self-Study

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Financial AnalysisThe Role of the Financial AnalystDefinition of the Analyst’s JobTypical AssignmentsThe Analyst’s Position in the Corporate StructureFinancial Management and Financial AnalysisActivities and Financial StatementsBusiness StrategyCompetitive EnvironmentThe Application of Analytical Techniques for Specific ProblemsInvestment DecisionsFinancing DecisionsDividend PolicyPrimary Goal of Financial AnalysisLong-Range versus Short-Range GoalsThe Balanced ScorecardTechniques Presented in This CourseRecapReview Questions
Differing ViewpointsThe Basic Structure of Financial StatementsThe Balance SheetThe Income StatementThe Statement of Stockholders’ EquityThe Statement of Cash FlowsFinancial Statement AnalysisLimitations of Financial Statement AnalysisHorizontal AnalysisVertical AnalysisRecapReview Questions

Ratio AnalysisProfitability RatiosNet Profit MarginOperating Profit MarginReturn on Assets(ROA)Return on Equity (ROE)Analyzing Return on Equity (ROE) Using the DuPont AnalysisEarnings per Share (EPS)Price Earnings Ratio (P/E)Dividend Yield and PayoutEconomic Value Added (EVA)Liquidity RatiosCurrent RatioQuick RatioNet Liquid BalanceActivity RatiosAverage Collection PeriodInventory TurnoverTotal Asset TurnoverOperating Cycle Working Capital RequirementsFree Cash FlowDebt and Equity RatiosLeverageDebt-to-Equity RatioTimes-Interest-Earned Ratio (TIE)Book Value per Share of Common StockUsing Financial RatiosIntracompany AnalysisTrend AnalysisIndustry ComparisonPredicting Financial ProblemsUsing Financial Ratios in AnalysisAn Example of Intracompany AnalysisAn Example of Industry ComparisonOther Commonly Used Analytical RatiosImportant Considerations Concerning Financial Statement InformationAlternative Asset Management TreatmentsCash and Marketable SecuritiesAccounts ReceivableInventoryFixed AssetsGoodwill and Intangible AssetsAlternative Liability and Equity TreatmentsCurrent LiabilitiesLeasing Assets Rather Than Buying ThemPensions and Other Post-Retirement BenefitsStockholders’ EquityRecapReview Questions
Cash ManagementMotives for Holding CashCollection and Disbursement TechniquesOther Aspects of Cash ManagementAccounts Receivable: Credit and Collection PoliciesCredit Quality StandardsCredit TermsCollection EffortsInventory Management ConsiderationsRaw MaterialWork in ProcessFinished GoodsRecapReview Questions
The Capital Budgeting ProcessDetermining the Cost of Capital or Discount RateThe Cash Flow from an InvestmentRisk and Capital InvestmentsTypes of RiskThe Cost of CapitalRisk Measurement and Cash Flow UncertaintyAlternative Ways to Measure Risk and Cash Flow UncertaintyThe Level of Risk and the Project’s Discount RateEvaluating Capital InvestmentsEvaluation Methods Excluding the Time Value of MoneyEvaluation Methods Recognizing the Time Value of MoneyThe Post-AuditRecapReview Questions
Forecasting the FutureThe Financial ForecastCalculating the ForecastConstructing a Valuation ModelDefining the Valuation TheoryRecapReview Questions
Issues in Capital Structure and Dividend PolicyBusiness and Financial RiskBusiness RiskFinancial RiskOptimal Capital StructureDividend PolicyPreferences of StockholdersFactors Affecting Dividend PolicyStock Dividends and Stock SplitsStock RepurchasesRecapReview Questions
Motives for MergersSearch and ScreeningScreening CriteriaQualitative CriteriaRisk AssessmentPrice AssessmentManagement DefensesMeasuring the Financial Impact of an AcquisitionThe Exchange RatioPurchase with CashPurchase with Acquiring Company’s StockAn Analysis of the Bargaining Position of Both CompaniesThe Impact on Earnings per ShareThe Level of Earnings per ShareThe Growth in Earnings per ShareThe Impact on the Price-Earnings RatioValid and Invalid Motives for MergingExpected Return from an Acquisition or MergerEstablishing a Valuation from the Acquiree’s PerspectiveRecapReview Questions

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About This Course

A Manager’s Guide to Financial Analysis, Sixth Edition, is intended for managers who have a basic understanding of accounting and of the structure of financial statements. It covers the fundamentals of financial analysis: financial statement analysis, ratio analysis, assessment of current asset management and capital investment proposals, capital structure, and analysis in support of mergers and acquisitions.

As a traditional, basic course for financial managers, A Manager’s Guide to Financial Analysis, Sixth Edition, is designed to help users of financial statements perform more sophisticated analysis and make better decisions based on the information available in those statements. Financial analysis can contribute significantly ...