Using Financial Statements in Business Decisions

Overview/Description
 This course makes the connection between accounting and finance: the analysis of basic financial statements for the purpose of answering questions and making decisions about a business. It introduces some basic distinctions of finance, and some fundamental tools of financial analysis. Through a series of practical exercises, learners apply their understanding of financial statements to various simple business scenarios. Finally, it paves the way for consideration of the next level of financial literacy, forecasting and budgeting.

Target Audience
 This series targets managers or other professionals with limited exposure to, or understanding of, financial systems. These people often have budgetary responsibilities, and will perform those responsibilities with a clearer understanding of the principles of basic accounting.

Expected Duration
3 hours

Lesson Objectives:

Three Basics of Finance

  • recognize the value of using the three elements of financial analysis (cash and accrual methods, direct and fixed costs, and breakeven analysis) in making sound and justifiable business decisions.
  • distinguish between the uses of cash and accrual accounting methods in recognizing financial activity.
  • identify true statements about direct and fixed costs.
  • identify the information that break-even analysis provides for a business.
  • use the break-even formula to calculate a company's breakeven point in units or sales.

    • Three Tools for Performing Financial Analyses

  • recognize how basic accounting analyses can be used in the day-to-day and long-term management of a business.
  • identify the types of business concerns that vertical analysis can address.
  • recognize the types of business concerns that horizontal analysis can address.
  • identify the major business concerns assessed by ratio analysis.
  • use the profitability ratio in financial analysis.
  • distinguish between the two liquidity ratios used in financial analysis.
  • identify true statements about the risk ratio in financial analysis.
  • identify the use of either of the two activity ratios in financial analysis.

    • Cash Flow Management: Why and How

  • recognize the value of cash flow analysis to the total business picture.
  • identify true statements about a sources and uses of cash flow analysis.
  • identify the purposes of a pro forma cash flow analysis.

    • Course Number: FIN0102