Financial Statements

Name: Financial Statements
Author: William Smith

Discover the vital role of financial statements for any business or investor

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Course: On-Demand

(upbeat music) - Let's explore the role financial statements play in the investment world. Balance sheets, income statements and cashflow statements will be explained. We'll also discuss how ratios are used to compare corporate earnings against a benchmark to determine their profitability, credit worthiness and general financial shape. Forecasting with financial statements will be discussed along with simple forecasting techniques. Finally, we'll go over the role of proforma statements. Financial statements are businesses' heart and soul and are their primary documents that investors use to make informed decisions about investing. Financial statements provide volumes of information to the investor from both a financial and accounting perspective. Financial statements usually involve four sections: the balance sheet, income statement, statement of cash flows, and the explanatory notes. Along with financial statements, a company also produces a comprehensive financial statement known as a 10-K. This is a comprehensive financial statement filed with the Securities and Exchange Commission which doesn't include all of the supplementary information that's geared for public consumption. The 10-K is on file with the SEC on their website where the public can look up several years of reports. Finance is closely related to accounting which itself is often referred to as the language of business. A primary role of the financial accountant is to prepare these statements in order to communicate a company's financial health to management, stockholders, and stakeholders. Financial statements are prepared using an approved accounting format so that they can easily be compared to other companies' financial statements. The International Accounting Standards Board sets the requirements on what must be presented in a financial statement and how the statement must be formatted. Although there are requirements that must be followed, there was still a lot of room for an organization to incorporate additional information. A wise investors should not rely solely on a company's financial statements. They should also have an in-depth knowledge of the products and services their company offers, their industry ranking, markers that they operate in, and their competition. In addition, all users of financial statements should know accounting principles and terminology so that they can better understand what the statements are saying. The users should also rely on other information to make an informed investment decision. For example, what effect does the national or local economy have on the sales of the product? Will the company be impacted by any pending or future legislation or technological innovation? Financial statements provide a key piece of information that investors need to know, but they shouldn't be the only information used in making an investment decision.

Beginner Provider : William Smith 5 Lessons · 18m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

This course explores the essential role financial statements play in the financial world, and for businesses and investors in particular. These lessons explain the creation of key financial statements to monitor, track, and report performance through the use of balance sheets, income statements, cash flow statements, and pro forma statements. In turn, we’ll examine why the information in these statements, its accuracy, and transparency, is critical to investors.

This course also looks at how ratios are used to compare corporate earnings against a benchmark in order to determine a company’s profitability, creditworthiness, and general financial shape, including gauging liquidity, leverage, and efficiency, and market value. Finally, it explores the role and benefits of forecasting using financial statements, introduces simple forecasting techniques, and covers the role of pro forma statements.

What You'll Learn

Understand financial statements and their importance to businesses and investors
Read and interpret balance sheets, income statements, and cash flow statements
Calculate liquidity, leverage, efficiency, profitability, and market value ratios
Use ratios to compare corporate earnings against a benchmark
Forecast performance using financial statements and simple forecasting techniques
Explain the role and benefits of pro forma statements

Key Takeaways

Financial statements play an essential role in the financial world and are critical for businesses and investors in particular.
Key financial statements such as balance sheets, income statements, cash flow statements, and pro forma statements are used to monitor, track, and report performance.
The accuracy and transparency of the information in financial statements is critical to investors.
Ratios are used to compare corporate earnings against a benchmark to determine a company's profitability, creditworthiness, and general financial shape, including liquidity, leverage, efficiency, and market value.
Financial statements support forecasting, and pro forma statements have a defined role in that process.

Frequently Asked Questions

What does this course cover?

It explores the role of financial statements for businesses and investors, the creation of balance sheets, income statements, cash flow statements, and pro forma statements, the use of ratios to gauge profitability, creditworthiness, liquidity, leverage, efficiency, and market value, and forecasting with financial statements.

Who is this course for?

The course addresses the role financial statements play for businesses and investors in particular, examining why the accuracy and transparency of statement information is critical to investors.

What skills will I gain from this course?

You will learn to read and interpret a balance sheet, income statement, and cash flow statement, calculate liquidity, leverage, efficiency, profitability, and other financial ratios, and learn about pro forma statements.

Does this course cover forecasting?

Yes. It explores the role and benefits of forecasting using financial statements, introduces simple forecasting techniques, and covers the role of pro forma statements.

What topics are taught in the lessons?

The lessons cover Understanding Financial Statements; Balance Sheets, Income Statements, and Cash Flow Statements; Ratios (Liquidity, Leverage, Efficiency, Profitability, and Market Value); Forecasting with Financial Statements; and Pro Forma Statements.