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Reading And Understanding Financial Statements

Course objective

By the end of this course, participants will:

    1. Understand the accounting concepts, principles and policies that are fundamental to the reading, understanding and analysis of any set of financial statements;
    2. Relate their knowledge of these accounting concepts, principles and policies to specific financial statements;
    3. Be able to make valid comparisons between:

        1. The financial statements of a company in different accounting periods; and
        2. Different companies' financial statements allowing for different accounting policies;

      Draw conclusions about the:

        1. Liquidity/solvency,
        2. Relationship between levels of debt and equity, and debt service capacity,
        3. Management of operating asset and liability levels,
        4. Operational performance, and
        5. Investment performance.

This course is presented as a stand alone seminar. It also forms part of Andrew McRobert's Basic Credit course, where the content is covered in a manner which relates to the credit issues discussed in that course.

Course duration
Two days

Andrew McRobert, or presenter trained by him. An abbreviated curriculum vitae of Andrew McRobert can be viewed here.

Course agenda
A copy of the 'standard' course agenda is attached below. The course has been designed in a series of modules. In respect of each country in which it is presented, a number of changes are made to the 'standard' model, in order to make it country specific:

    1. References to mandatory accounting policies are changed to reflect the current position in the country; and
    2. Reference is made to the financial statements of a company in the country in question.
    3. In addition, the course may be amended, if required, as follows:

        1. Substitution of case studies drawn from the financial institution's own portfolio;
        2. Inclusion of additional material on topics of particular interest to a specific financial institution; and/or
        3. Any other modifications that a client considers necessary.

Basic Course Agenda

Date Topics Case Study Materials
Day 1 AM

Introduction to financial statements:

  • Double entry accounting
  • Accounting concepts, principles & policies
  • The statement of accounting policies
  • General principles of financial reporting
  • Personal balance sheet
  • Consolidation exerciseInventory valuation exercise
Day 1 PM

The financial statements (1):

  • Balance sheet Profit & loss statement
  • Notes to the accounts
  • Auditors & directors' reports
  • What is 'recurrent, operating earnings'?
  • Review of the financials of OPSM Protector Ltd
  • Abnormal & extraordinary items
  • Goodwill & other intangibles
Day 1 Homework Between day 1 and day 2, participants are asked to complete a homework exercise, where they prepare a balance sheet and a profit and loss account from a list of balances. Homework exercise
Day 2 AM

The financial statements (2):

  • Segment reporting
  • Cash flow analysis-the standard
  • Cash flow analysis-preparing the analyst's own version
  • Review of homework exercise
  • Funds statement exercise;
Day 2 PM

Obtaining information from the financials:

  • Liquidity/solvency,
  • Relationship between levels of debt and equity, and debt service capacity,
  • Management of operating asset and liability levels,
  • Operational performance, and
  • Investment performance.
  • Obtaining that information through ratios
  • Interpreting ratios, and integrating them into financial analysis and conclusions
  • Stable HoldingsLimited
  • Class exercise: applied cosmetic accounting

contact details

South Africa: +27 82 447 4256

Australia: +61 402 048 326