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Financial Analysis Course

This page contains our free online financial statement analysis course. It will teach you the basics of financial analysis, including examples of using it.

The Course Covers:
 

  • The Fundamentals of Financial Statements 

  • How to Analyse Financial Statements

  • Key Financial Ratios and Formulas

  • Examples of financial analysis in action

 

Course Modules:

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To start the online course, scroll down.

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This course is FREE, and no registration is required. It is perfect for start-up businesses and companies looking for financing.

Financial Statement Analysis Made Easy

Financial Analysis Course

Part 1: An Introduction to Financial Analysis

Module overview:

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  • Course Introduction 

  • Course Overview 

  • Course Aim

  • And more

What are financial statements?

In accounting and finance, financial statements are any reports that display a business or company's financial health (sales, expenses or profits) or financial position (assets, liabilities or equity). Generally, financial statements refer to two specific financial reports: the profit and loss statement and the balance sheet. 

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Sometimes, the profit and loss statement is called the statement of comprehensive income. Sometimes, the balance sheet is called the statement of financial position. 

Who should learn to analyse financial statements?

Reading, understanding and analysing financial statements is a handy skill. 

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Those who would find this helpful skill include:

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  • Business owners

  • Company directors

  • Business students

  • Accounting students

  • Bookkeepers 

  • Accountants

  • Entrepreneurs

  • Shareholders and investors 

  • Stock traders and investors 

Learn Financial Statement Analysis

Part 2: Financial Formulas and Ratios

Module overview:

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  • Company accounts

  • Comparing financial information 

  • Common financial formulas 

  • Common financial ratios 

Common Financial Formulas and Financial Ratios

Below are the most basic and commonly used formulas used for financial analysis:

 

Gross Profit

Evaluate how much gross profit is generated from sales

Gross profit margin = gross profit/total sales

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Gross Profit Percentage

Gross profit margin as percentage = (gross profit/total sales)*100

 

Net Profit

Evaluate how much gross profit is generated from sales

Net profit margin = gross profit/total sales

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Net Profit Percentage

Net profit margin as percentage = (gross profit/total sales)*100

 

Current Ratio

Calculate a company's ability to pay off short-term liabilities with the company's assets.

Current ratio = current assets/current liabilities

 

Acid Test Ratio

Calculate a company's ability to pay off short-term liabilities with liquid assets.

Acid test ratio = liquid assets/current liabilities

 

Days Sales Outstanding (DSO)

Measure the average number of days it takes for the company to collect payment from credit sales. DSO can also be called 'collection period' or 'receivable turnover in days'.

DSO = (debtors balance/total credit sales)*365

 

Days Payable Outstanding (DPO)

Measure the average number of days it takes for the company to pay its credit suppliers. DPO can also be called 'payment period' or 'accounts payable turnover in days'.

DPO = (creditors balance/total credit purchases)*365

Accounting Formulas and Ratios

Part 3: Financial Analysis Example

Module overview:

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  • Analysis of the profit and loss statement

  • Analysis of the balance sheet 

A Complete List of other Financial Formulas and Financial Ratios

Financial Formulas for Profitability

Return on assets

Also known as return on investment. Used to evaluate a company's efficiency to generate sales from its assets.

ROA = net profit/total assets

 

Return of shareholders' equity

Measure the income derived from shareholders' equity.

Return of shareholders equity = net profit/shareholders equity

Financial Formulas for Liquidity 

Cash ratio

Analyse a company's ability to pay off short-term liabilities with company cash.

Cash ratio = cash/current liabilities

 

Net working capital

Determine if a company can meet its current liabilities with its current assets.

Net working capital = current assets - current liabilities

Financial Formulas for Management Efficiency

Inventory turnover

Measure how many times inventory is sold and replaced.

Inventory turnover ratio = cost of sales/inventory

 

Days inventory outstanding

Measure how many days inventory is in the warehouse before the sale.

Days inventory outstanding = 365/inventory turnover

 

Operating cycle

Calculate the days the company takes to complete one operating cycle, i.e., pay for purchases, sell them and collect the revenue from the sale.

Operating cycle = days inventory outstanding/days sales outstanding

Financial Formulas for Leverage

Debt ratio

Measure the amount of company assets that are financed by debt.

Debt ratio = total liabilities/total assets

 

Equity ratio

Measure the amount of company assets that are financed by owners' equity.

Equity ratio = total equity/total assets

Financial formulas for valuation and growth

Earnings per share(EPS)

Calculate the rate of earnings per company share.

EPS = (net profit-dividends)/company shares

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Ready to take accounting more seriously?

Take bookkeeping and accounting to the next level by enrolling in the Bookkeeping Master's Ultimate Bookkeeping Course

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Gain a certificate of completion 

Learn bookkeeping and accounting for limited companies

Learn how to create year-end accounts

Learn advanced accounting principles

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