Corporate Finance 101: Financial Statement Analysis & Ratios

A zoom-in, zoom-out, connect-the-dots guide to understanding financial statements, and analysing companies
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Instructed by Loony Corn Business / Finance
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  • Lectures 43
  • Length 8 hours
  • Skill Level All Levels
  • Languages English
  • Includes Lifetime access
    30 day money back guarantee!
    Available on iOS and Android
    Certificate of Completion
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About This Course

Published 3/2016 English

Course Description

This is a zoom-in, zoom-out, connect-the-dots tour of Financial Statement Analysis

Let's parse that

  • 'connect the dots': Financial Statement Analysis gets a bad rep because its hard to connect the nitty-gritty of the financial statements to the company as a whole. This course makes a serious effort to do exactly that.
  • 'zoom in': Getting the details is very important in corporate finance - a small typo, or a minor misunderstanding can cost a company big. This course gets the details right where they are important.
  • 'zoom out': Details are important, but not always. You probably don't care about the nitty gritty of accounting for contingent liabilities if you don't know what accounts payable are. This course knows when to switch to the big picture.

What's Covered:

  • Corporate Finance Introduced: partnerships, proprietorships and the corporation
  • The Agency Problem: How auditors, the board of directors and the capital markets regulator play a role
  • Financial Statements: Balance Sheet, Income Statement, Statement of Comprehensive Income and Cash Flow Statement at exactly the right level of detail
  • Ratios: Five important types of ratios: liquidity ratios, leverage ratios, turnover ratios, profitability ratios and valuation ratios
  • Dupont's Identity: Return-on-equity can be decomposed into 3 elements: profits, asset-leanness and leverage.
  • External Financing Needed (EFN) and the Sustainable Rate of Growth: How fast can a company grow if it chooses to forgo external funding? Every startup should know this, really.
  • Common Accounting Shenanigans: The playbook of financial statement cheats has been studied by auditors and regulators - learn from history so you are not condemned to repeat it.

Case Studies:

Understanding a company entirely from its investor filings

  • Facebook: Fast-growing and profitable, this is the dream stock right now.
  • LinkedIn: Versatile, but struggling to break through - the jury seems out on LinkedIn
  • Twitter: Bleeding red and slowing growth - Twitter seems to be in trouble.

Talk to us!

Mail us about anything - anything! - and we will always reply :-)

What are the requirements?

  • This course assumes no prior knowledge of accounting or finance
  • The investor relations sections of Facebook, Twitter and LinkedIn will be used, but the course will discuss how to access and use these public sites

What am I going to get from this course?

  • Interpret financial statements - the Balance Sheet, Income Statement and Statement of Cash Flows
  • Parse SEC filings such as the 10K and 10Q to understand the business model of any company entirely from its investor filings
  • Calculate ratios in all major categories: liquidity, leverage, turnover, profitability and valuation
  • Apply Dupont's Identity to see whether a company's stock returns are driven by operational efficiency, asset efficiency or leverage
  • Calculate the sustainable rate of growth at which a company can grow without external financing

What is the target audience?

  • Yep! Business majors and aspiring MBAs
  • Yep! CFA Level I candidates
  • Yep! Entrepreneurs looking to understand basic corporate finance
  • Nope! Accountants - you'll find this course too basic

What you get with this course?

Not for you? No problem.
30 day money back guarantee.

Forever yours.
Lifetime access.

Learn on the go.
Desktop, iOS and Android.

Get rewarded.
Certificate of completion.

Curriculum

Section 1: You, Us & This Course
02:08

What this course is about, and what you will get from it.

Section 2: The Enterprise
09:45

Why do people work? And why, sometimes, a lone hand is a cool one.

06:08

Partnerships - general and limited - are important to understand (especially if you encounter any private-equity folks at cocktail parties)

13:47

Artificial legal person, that's what a corporation is.

Public and Private
06:37
12:37

Principal-agent conflicts of interest are as old as the hills. See how auditors and the government (capital market regulators) get involved to keep things clean.

Section 3: The Balance Sheet
05:33

A tally of assets and liabilities, and what's left over is hopefully positive - that's what a balance sheet is.

Assets
14:54
03:50

Future obligations that will have to be met by the corporation - these are called liabilities.

10:10

Shareholder's equity is what is left for the owners, the shareholders. This includes both invested capital and retained earnings.

13:10

Let's immediately put our theoretical knowledge to work studying 3 comparable balance sheets.

Section 4: The Income Statement
16:18

Revenue - Costs = Net Income. Conceptually simple, but the devil is in the details!

13:07

Follow the convoluted waterfall that takes us from revenue to net income. EBITDA, operating profit, and gross profit are some of the stops along the way.

09:45

Recurring or non-recurring? This is an important distinction about net income that folks need to know about.

06:30

Again let's immediately put our knowledge to work - see how powerful Facebook's business is, and how shaky Twitter is.

Section 5: The Statement of Cash Flows
12:34

Cash is key - a firm can go bankrupt despite significant assets, and significant profits, if it runs out of cash. That's why we need a statement of cash flows distinct from the income statement and balance sheet.

11:58

Cash flows from operations, from financing and from investing: see how these are computed in the indirect and direct methods.

03:28

Facebook has a ferociously profitable business, that generates plenty of cash from operations. The firm is aggressive about re-investing this into assets for the future.

Working with Cash Flows - I
15:44
Working with Cash Flows - II
13:57
Section 6: Ratios
05:00

Once we have financial statements, what do we do with them? Use them to analyse companies of course! And there are 2 important techniques for doing this: time-series and peer-group (cross-sectional) analysis.

12:47

Liquidity ratios focus on short-term solvency, leverage ratios focus on long-term solvency and turnover ratios focus on efficiency. There is a natural tension between efficiency and solvency!

05:13

Profits and valuations - return-on-equity and return-on-assets. We are getting to the heart of corporate finance now.

Section 7: Some Advanced Topics
09:32

How can a firm make money for its shareholders? Three possible ways: profitability, leanness, and leverage. That's what Dupont's identity tells us.

10:55

How fast can a company grow if it forgoes external financing? Every startup should ask itself this.

10:06

Cheating on books is as old and as common as cheating on spouses. Auditors and the SEC are watching though, remember that.

Section 8: Case Studies
08:40

Highly profitable, and growing like crazy: that's why everyone loves Facebook's stock.

12:29

A diversified business that might be huge - but also might turn into an also-ran. The jury is out on LinkedIn.

17:51

The jury definitely seems to be in on Twitter, and its not looking good.

Section 9: EPS
Introducing EPS
13:30
Basic EPS
13:13
Diluted EPS
16:04
Diluted EPS (continued)
16:54
Section 10: Inventories
Inventory Valuation
15:19
Understanding Inventories
17:07
Section 11: More on Assets
Fixed Assets
11:31
Capitalisation Decisions
13:29
Depreciation Methodologies
12:51
Implications of Depreciation
13:10
Section 12: Leases
10:16

Lease is a contract between lessee and lessor. Lessee makes payments for using the property owned by the Lessor. There are two types: Financial lease and Operating Lease. The accounting for both types is different.

08:22

The Financial Lease accounting requires computing net present value of all the lease payments.

12:28

A lease is a financial lease if any one of four criteria given by the accounting bodies is met. There are pros and cons in both the types of leases. The lessee and lessor need to analyse these to decide which lease do they want to enter into.

13:12

A simple example of lease accounting

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Instructor Biography

Loony Corn, A 4-person team;ex-Google; Stanford, IIM Ahmedabad, IIT

Loonycorn is us, Janani Ravi, Vitthal Srinivasan, Swetha Kolalapudi and Navdeep Singh. Between the four of us, we have studied at Stanford, IIM Ahmedabad, the IITs and have spent years (decades, actually) working in tech, in the Bay Area, New York, Singapore and Bangalore.

Janani: 7 years at Google (New York, Singapore); Studied at Stanford; also worked at Flipkart and Microsoft

Vitthal: Also Google (Singapore) and studied at Stanford; Flipkart, Credit Suisse and INSEAD too

Swetha: Early Flipkart employee, IIM Ahmedabad and IIT Madras alum

Navdeep: longtime Flipkart employee too, and IIT Guwahati alum

We think we might have hit upon a neat way of teaching complicated tech courses in a funny, practical, engaging way, which is why we are so excited to be here on Udemy!

We hope you will try our offerings, and think you'll like them :-)

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