Common Issues with Financial Ratio Analysis

Learning Objectives

• To explore the major limitations of ratio analysis.
• To recognize the differences between accounting profit and economic profit and between book value and market value.
• To identify the determinants and limitations of earnings quality.
• To explore the relationships between earnings, cash flow, receivables, and inventory.
• To describe how to adjust financial statements for changes in accounting treatments.

Course Description

Just seeking the data is base. However, when we analyze the data we get better understanding of the overall picture. Financial statements are nothing but base data for the business and its operations. Ratio analysis provides perspective to these numbers. From this angel, financial statements must be analyzed in order to fully understand the data presented. This webinar identifies common issues that should be considered when analyzing financial statements using financial ratios. 

Key Topics include:

• Inherent limitations of financial ratio analysis.
• Trends to consider to determine earnings quality, including the relationships between earnings, receivables, inventory, and cash flow.
• The impact of changes in accounting principles and estimates and the impact of accounting errors.
• Impact of foreign currency fluctuations from translating statements and from specific foreign exchange transactions.
• A short case study of a NYSE traded company that issued fraudulent financial statements that were undetected even though there was limited correlation between earnings and cash flow.
• Limitations of ratio analysis
• Earnings quality
• Impact of changes in accounting treatments
• Impact of foreign currency fluctuations

The webinar also covers Financial Statement Analysis topics tested in the Certified Management Accountant (CMA) Part 2 examination as outlined by the CMA Part 2 exam content specification outline. It is a valuable webinar brushing up knowledge for the accounting, tax, and finance professionals.

Overview

• Perspectives of Profit

  7 mins
• Limitations of ratio Analysis

  23 mins
• Earnings Quality

  37 mins
• Changes in Accounting Principle

  43 mins
• Impact on Ratio Analysis

  54 mins
• Financial Statement Impacts

  58 mins