Have you ever had a set of financial statements dropped on your desk, you go to pick up the thick, picture-less, document and begin reading,
but 10 minutes later you are overwhelmed by the detail, the terminology, and the horrible boilerplate legalese.
An hour later, you are still scratching your head trying to figure out what it all means.
In this course, we are going to learn how to read a financial statements and perform financial analysis.
My name is Blair Cook and I will be your financial learning facilitator today.
This is obviously an important skill for financial and non-financial professionals alike.
However, it has been my experience that many folks outside finance just don’t get it.
And many finance folks rarely get or take the opportunity to sit back and appreciate what the numbers are saying.
I call this skill Financial Literacy.
It is an ability to pick up a set of financial statements and almost instantly find the information of most relevance and to...
translate the numbers into an overall assessment of the company.
Financial analysis answers important questions about a company’s:
-Performance -Liquidity position
-Financial risk -Strengths and weaknesses
-Productivity -Returns
-Value -Stage in its lifecycle
-Cash generation potential -Ability to continue as a going concern
Pretty important stuff wouldn’t you agree? You bet it is.
Whether you are a manager, an executive or an investor- this stuff matters.
This stuff determines such things as the company’s:
-Relative position in the industry
-The size of the performance bonus it will pay out -The ability to pay or raise dividends
-The ability to raise and attract capital
-The ability to grow the company organically, or through mergers and acquisitions
-Or conversely, the exposure to a takeover
These are the important stories financial statements tell.
Unfortunately, these stories gets lost in the gobs of information that get prepared and circulated.
So in this course, we are bravely going to tackle it all and leave no stone unturned.
By the time you have completed this course, you should be able to analyze the company’s financials like a pro.
Let’s start with where you get financial information:
In the United States, all publically listed companies must file their quarterly results on EDGAR
These filings can be retrieved directly from the SEC website. (http://www.sec.gov/edgar.shtml)
In Canada, you can retrieve publicly filed financial information from SEDAR (www.Sedar.com)
You can also visit the companies’ websites as this information is often posted under the Investor Relations section.
Lastly, you can visit any one of the bazillion financial investing websites that track this information
Bloomberg, Morningstar, Yahoo, Google, MSN etc.
The advantages of using a financial website are:
-They have already calculated many of the financial ratios that we will discuss in this course
-They provide direct links to the filings and put the financial information in a summarized format right in front of you
-They also enable easier comparisons with the company’s peers
-Many investment websites track analyst estimates,
which gives you another data point and some forward looking guidance as to what to expect
Now there are a few disadvantages of using investment websites, including:
-They don’t contain the same depth of discussion of the results that you would find in the actual filings
-If your company is private, then coverage in either government filings or investment websites is not an option, it simply doesn't exist.
Most investment websites don’t track all the important non-finanical information that is often