Introduction
Financial analysis, cash flow analysis, and valuation
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1. Quick Review of the Financial Statements
Who uses financial statements?
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Review of the balance sheet
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Review of the income statement
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Review of the statement of cash flows
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2. Analyzing Financial Statements
What is financial ratio analysis?
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Comparing financial statements across time
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Comparing financial statements across companies
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Common-size financial statements
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3. Ratio Analysis: DuPont Framework
Gunpowder, the French Revolution, and the DuPont framework
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Ratio analysis
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Return on equity
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DuPont framework
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Current ratio
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Debt ratio
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Price-earnings ratio
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Real-world: Apple vs. Google vs. Microsoft
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4. Ratio Analysis: The Operating Cycle
Nike, McDonald’s, and the operating cycle
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The operating cycle
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Days sales in inventory
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Average collection period
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Days purchases in payable
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Real-world: Procter & Gamble
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5. The Statement of Cash Flows
Jim Stice operating cash flow matrix and a wife named Kay
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Analyzing cash flows
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What do the cash flows tell you?
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Cash flow patterns
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One method of analysis
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Two methods for presentation
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6. Forecasting Financial Statements
Forecasting the financial statements of Home Depot
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What causes financial statement amounts to change?
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The initial assumptions
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Forecasted income statement
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Forecasted retained earnings
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Forecasted assets
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Forecasted liabilities and equity
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7. Introduction to Business Valuation
The intersection of accounting and finance
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Value is based on expectations about the future
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Overview of the market approach: Using multiples
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Overview of the cost approach: Depreciated replacement cost
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Overview of the income approach: Discounted cash flow
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9. Valuation: Free Cash Flows
Buying the Hong Kong car?
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Basic idea: Cash flows, timing, and risk
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Risk and interest rates
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Forecasting cash flows
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Simple discounted cash flow valuation example
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Other multiples: The case of WhatsApp
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10. Valuation: Comparing Models
Brief McDonald's history
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McDonald's: The numbers
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McDonald's: Dividend-based valuation
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McDonald's: Earnings multiple
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McDonald's: Discounted cash flow valuation
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McDonald's: Lessons from a comparison of the models
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Conclusion
Continue your financial accounting journey
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Glossary_Financial_Accounting_Part_Two.zip
(100 KB)