Advanced Financial Analysis Training Course

This course can also be presented in-house via live webinar.

Advanced Financial Analysis Course Objectives:

By the end of this course participants will understand:

  • The key methods used to manipulate financial statement and forecasts
  • How to analyse historic financial statements using advanced ratio analysis to assess the quality of the financial reporting and the financial health of the business
  • How to analyse and assess financial forecasts using different accounting issues

Much of the course work involves Excel modelling and analysis, equipping participants with the tools to analyse financial models:

  • Building up from partially-complete models
  • Working with integrated financial statements
  • Running scenarios, iterating and optimising

Advanced Financial Analysis Course Content:

Day 1

Accounting overview – where manipulation and fraud commonly take place

  • Conditions that may result in accounting manipulation
    • Incentives and pressures to manipulate
    • Opportunity
    • Attitude of management

Case study – Analysing the conditions for fraud – Enron

Common forms of manipulation and fraud – income statement

  • Revenue recognition issues
    • When is a sale not a sale
    • Accounting rules governing revenues
    • Earning revenue – principal or agent?
    • The problems with long term contracts
  • Abnormal sales growth, the Symbol effect
  • Revenue recognition red flags

Case study – The participants analyse a case company’s accounting for revenue and suggest adjustments to correct manipulation

Case study – Symbol Inc

  • From revenue to EBIT
    • Increasing income from one off events
    • Misleading classifications
    • Capitalising interest
  • Manipulation of cost of goods sold
    • Cost deferral and impairments
  • Inventories, growth vs sales and valuation issues
  • EBIT manipulation red flags

Case study – Enron red flags

  • Other income statement issues
  • Shifting current expenses to a later period
    • Identifying capitalisation issues

Case study – Thomson Research

  • Techniques to hide expenses or losses
  • Shifting current income to a later period
  • Shifting future expenses to an earlier period

Case study – Xerox

Day 2

Evaluating the quality of financial reporting – ratio analysis

  • Quantitative tools used to assess financial reporting quality
  • Dupont analysis
    • ROE and ROCE analysis
    • Extended Dupont analysis
  • Further ratio analysis
    • Working capital and asset based analysis
    • Assessing divisional performance
    • Credit based analysis
    • Altman z scores
    • Accruals based analysis

Case study – The participants analyse the case study company and produce the first set of ratios to assess the quality of the financial reporting to identify where the accounts may have been manipulated

Case study – The participants analyse a case company’s accounting for further income statement issues and suggest adjustments to produce a “clean” set of historic numbers

Common forms of manipulation and fraud – balance sheet

  • Long life assets
    • What does an asset cost?
  • Amortisation and depreciation issues
    • Asset lives and depreciation rates

Case study – The participants analyse a case company’s accounting for PPE and Intangibles for manipulation

  • Off balance sheet financing
    • Accounting for leases – the operating lease disappears
    • Treatment of leases for valuation purposes
    • Liability calculation
    • Balance sheet adjustments
    • Treatment effects on financial ratios
  • Pension accounting – income statement and balance sheet issues
    • Accounting for pensions
    • Correct allocation of costs – EBIT or not
    • Which liability and effect on valuation
    • Treatment effects on financial ratios

Day 3

Common forms of manipulation and fraud – balance sheet (continued)

  • Financial instruments – recognition and valuation
    • The after effects of the financial crisis – new accounting rules for financial instruments
    • Fair vs historic cost – assessment and effects on valuation
    • Treatment effects on financial ratios

Case study – The participants analyse a case company’s accounting for various balance sheet items and suggest adjustments to correct manipulation

  • Foreign currency issues – translation and transaction effects
    • Which currency to use
    • Calculation of translation effect
    • Implications for valuation
    • Treatment effects on financial ratios

Case study – The participants analyse a case company’s accounting for various balance sheet items and suggest adjustments to correct manipulation

Common forms of manipulation and fraud – cash flow

  • Picking up the trail – earnings vs cash
  • Operating vs other cash flows – improving cash conversion
  • Manipulating working capital for cash flow
    • Receivables
    • Payables
  • Accounting for cash and the quality of cash holdings
    • Does the cash exist?
    • Polly Peck and Cyprus

Case study – The participants analyse a case company’s accounting for various cash flow statement items and suggest adjustments to correct manipulation

Background of the Trainer:

The trainer is a qualified chartered accountant, who spent several years in corporate finance post qualification. He then spent 18 years in the investment management industry as an analyst/fund manager with Threadneedle Asset Management, a director and head of UK Equities at Scottish Widows Investment Partnership as European, then Global Head of Equity Research at HSBC Asset Management. He ran various types of retail and wholesale funds and produced research on companies in Europe and on a global basis. He developed valuation and research processes and managed teams of European and global analysts and fund managers.

Since leaving the investment management industry the trainer has managed the investment management and investment banking operations of a UK based training company developing programmes for clients as diverse as HSBC, Morgan Stanley, Deutsche Bank, Citigroup, Allen & Overy, JP Morgan, Barclays Bank, Barclays Wealth, Morgan Stanley Investment Management and Schroders. He has managed major graduate programmes for investment banking and investment management clients, training graduate to managing director level participants and advising clients on their training requirements for accountancy, corporate finance and valuation, investment management and private wealth training.

Advanced Financial Analysis Course Summary:

This Advanced Financial Analysis course helps the participants to understand firstly, the main types of manipulation that take place in practice (including recent public company examples), then looks at how these types of manipulation can be identified and an assessment of the quality of a company’s financial reporting arrived at through the use of analytical techniques.

The Advanced Financial Analysis course deals with numerous accounting issues and provides the latest state of accounting under IFRS and US GAAP.

This Advanced Financial Analysis course is run in an interactive, participative format, where participants learn by doing. The key concepts covered in the main teaching sessions are punctuated and illustrated by detailed case and modelling work.

The approach has been designed to equip participants to put key concepts into practical use immediately

Each participant should bring a lap top with USB port to the course to facilitate modelling work.

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Discounts

5-6 participants – 20% discount,7-8 participants – 25% discount,Over 9 participants – 30% discount