The instructor starts by explaining financial accounting, which provides reliable information about a firm's performance to external parties like investors and tax authorities.

He distinguishes it from managerial accounting, which focuses on internal users. Financial accounting follows strict standards, such as GAAP in the US, ensuring consistency.

He highlights the importance of accrual accounting, where transactions are recorded when earned or incurred, not when cash is received.

The instructor emphasises that financial accounting is based on assumptions, principles, and conventions, leading to four key financial statements: income statement, balance sheet, statement of owners' equity, and statement of cash flows.

A PDF of this Slide Deck is available to download from the Resources Section of this lecture.

The instructor explains the importance of accounting standards, which are the rules for recording and reporting accounting transactions.

He mentions two main standards: GAAP, used in the US and issued by the FASB, and IFRS, used internationally and issued by the IASB.

Accounting standards ensure financial statements are complete, consistent, and comparable, making them reliable. US publicly traded companies must follow GAAP, but since 2007, non-US companies can list in the US using IFRS.

He highlights differences between GAAP and IFRS, such as LIFO vs. FIFO inventory methods, R&D cost treatment, and write-down reversals.

The instructor advises maintaining a critical approach when analysing financial statements.

A PDF of the Slide Deck is available for download from the Resources Section of this lecture.

The instructor explains the concepts underlying accounting, emphasising their importance in providing a practical framework for accounting principles.

He covers assumptions, such as the separate entity assumption, which states that a business is distinct from its owners, and the going concern assumption, which assumes business continuity.

He also discusses the stable monetary unit assumption, highlighting the need for a reliable currency.

The instructor then explains principles like the historical cost principle, matching principle, revenue recognition principle, and full disclosure principle.

Lastly, he discusses modifying conventions, including materiality, cost-benefit, conservatism, and industry practices, stressing their role in practical accounting and the need for judgment.

A PDF of this Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the key accounting principles essential for accurate financial reporting.

He highlighted the importance of the accrual principle, which records revenues and expenses when they are earned or incurred, regardless of cash flow.

He also covered the consistency principle, ensuring the same accounting methods are used over periods, and the conservatism principle, which advises caution in reporting.

The instructor discussed the going concern principle, assuming the business will continue operating, and the matching principle, aligning expenses with related revenues.

He emphasized the relevance of these principles in GAAP and IFRS frameworks.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explains the differences between single entry and double entry bookkeeping, emphasising their significance.

He starts with the single entry system, which records transactions with a single entry, focusing on cash disbursements and receipts.

This system, suitable for small businesses, cannot track assets and liabilities or produce a balance sheet, leading to potential errors and limitations.

He then describes double entry bookkeeping, where every transaction affects at least two accounts, maintaining the accounting equation (Assets = Liabilities + Equity).

Transactions are recorded as debits and credits, ensuring balance. He stresses the importance of understanding debits, credits, and their role in maintaining accurate financial records.

A PDF of the Slide Deck is available to download from Resources Section of this lecture.

The instructor reinforces understanding of the accounting equation, which states that assets equal liabilities plus shareholder equity.

He explains that a company needs assets to produce products and generate sales, financed through liabilities (debt and working capital) and shareholder equity.

This equation is fundamental to double entry bookkeeping, ensuring balance in financial records.

Assets include cash, accounts receivable, fixed assets, and inventory.

Liabilities cover debts and obligations like accounts payable, rent, taxes, and salaries.

Shareholder equity includes initial investments, retained profits, and less any losses or dividends.

The instructor emphasises that while the accounting equation ensures balanced accounts, it doesn't indicate company performance, which requires detailed financial analysis.

A PDF of the Slide Deck is available to download from Resources Section of this lecture.

The instructor explains the accounting cycle, emphasising its importance in recording transactions and closing books.

He describes the cycle as covering individual transactions and the annual or quarterly bookkeeping processes.

For each transaction, he details the steps: identifying the event, preparing documentation, matching the transaction with the correct account, and recording it in the financial records.

He then outlines the closing process: preparing a trial balance, accounting for accrued items, creating an adjusted trial balance, and preparing financial statements.

Finally, he explains the importance of understanding this process, even if one doesn't perform it personally.

A PDF of the Slide Deck is available to download from Resources Section of this lecture.

The instructor introduced financial statements, explaining their importance in accounting.

He detailed the four main statements required under GAAP: the balance sheet, income statement, statement of owners' equity, and statement of cash flows.

The balance sheet shows a firm's financial position at a specific point, while the income statement outlines revenues and expenses over a period.

He explained that the statement of owners' equity records changes in retained earnings, and the cash flow statement summarizes sources and uses of cash.

The instructor emphasized understanding these statements to grasp a firm's financial operations.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explains how to apply accounting principles in banking and finance.

He highlights the importance of understanding these principles for informed financial decisions and accurate analysis.

He discusses key principles like accrual, consistency, going concern, and conservatism.

He uses examples such as loan loss provisioning, mark-to-market accounting, and consolidation accounting to illustrate their application.

For instance, a bank recognises interest income on loans as it accrues, and an investment bank updates securities' value to reflect market price changes.

These principles ensure transparent, consistent, and reliable financial reporting, aiding better decision-making and regulatory compliance.

A PDF of this slide deck is available to download with this lecture.

The instructor discusses IFRS 9, an international financial reporting standard by the IASB, and its application in banking and finance.

He explains that IFRS 9 addresses accounting for financial instruments, classifying financial assets into amortised cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL).

He elaborates on each category with examples, such as banks holding loans or bonds.

The instructor introduces the expected credit losses (ECL) model for impairment recognition, emphasising its forward-looking approach.

He highlights the impact on financial statements, enhancing transparency and decision-making in financial reporting.

A PDF of this slide deck is available to download with this lecture.

The instructor explains how to apply accounting principles in manufacturing companies.

He discusses key principles such as accrual, consistency, going concern, and conservatism, using case studies to illustrate their application.

For inventory valuation and cost of goods sold, he calculates the cost of raw materials and total cost of goods sold.

He explains depreciation using straight-line depreciation for new machinery.

For product costing, he allocates manufacturing overhead based on machine hours.

Finally, he demonstrates revenue recognition for long-term contracts using the percentage of completion method.

These examples highlight the importance of understanding accounting principles for accurate reporting and analysis in manufacturing.

A PDF of this slide deck is available to download with this lecture.

The instructor explains the fundamental concepts of general and subsidiary ledgers.

He emphasises that the general ledger (GL) is the primary accounting record, encompassing all accounts like assets, liabilities, equity, revenues, and expenses.

He highlights that transactions in the GL follow the double entry system, ensuring balance in the accounting equation.

Subsidiary ledgers provide detailed information on specific accounts, such as accounts receivable, accounts payable, inventory, and fixed assets.

The instructor clarifies the process of recording transactions in subsidiary ledgers and summarising them in the general ledger.

He concludes by emphasising the importance of subsidiary ledgers in enhancing detail, improving accuracy, and streamlining financial reporting.

A PDF of the Slide Deck is available to download with this lecture.

The instructor explained the double-entry accounting system, highlighting that every transaction affects at least two accounts.

He described the balance sheet components: assets, liabilities, and equity.

Debits increase assets and expenses, while credits increase liabilities, equity, and revenue.

The instructor provided examples, such as buying equipment, taking out loans, earning revenue, and paying expenses, showing their impact on the balance sheet.

He emphasized that accurate record-keeping ensures the balance sheet equation, Assets = Liabilities + Equity, remains balanced.

The instructor underscored the importance of understanding debits and credits for maintaining accurate financial records.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the income statement and the use of T accounts in accounting.

He detailed how the income statement shows a company's revenues and expenses over a specific period.

The instructor illustrated that T accounts are shaped like a "T" with debits on the left and credits on the right.

He provided examples, such as recording sales revenue as a credit and rent expense as a debit, to demonstrate how transactions affect these accounts.

The instructor emphasized how balancing T accounts helps determine the company's profit or loss.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the timing and recognition of revenue and expenses in financial reporting.

He emphasized the importance of recognizing revenue when it is earned and matching it with related expenses.

The instructor provided examples, such as service contracts and utility bills, to illustrate these principles.

He also discussed accruals and deferrals, highlighting their role in accurate financial statements.

Case studies of a software company and a manufacturing firm were used to demonstrate practical applications of these concepts.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained accrual accounting as an accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of cash flow.

He highlighted the key principles: the revenue recognition principle, which records income when earned, and the matching principle, which matches expenses with related revenues.

The instructor provided examples, such as billing clients and receiving utility bills, to illustrate these concepts.

He discussed the advantages of accrual accounting, including a more accurate financial picture and better decision-making, as well as its complexity.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

Section Learning Objective: To understand the three main financial Statements, the Income Statement or Profit and Loss Account, the Balance Sheet and the Cash Flow Statement and how they fit together.

The instructor emphasised the importance of understanding the three main financial statements: the income statement, balance sheet, and cash flow statement, and how they interrelate.

He explained that business strategy and plans are ineffective without proper financial management, which requires comprehension of financial statements prepared using widely accepted principles like GAAP.

The instructor aimed to help students understand these statements, their implications, and key metrics useful for daily management.

He included a case study on Apple to illustrate these concepts and linked financial understanding to business planning.

The instructor explained the three primary financial statements: the Income Statement, the Balance Sheet, and the Statement of Cash Flows.

He highlighted that the Income Statement tracks revenues and expenses over a period, showing profitability.

The Balance Sheet provides a snapshot of assets, liabilities, and equity at a specific point in time, indicating financial position.

The Statement of Cash Flows records cash inflows and outflows, highlighting liquidity.

He detailed how these statements interrelate, with net income affecting retained earnings and changes in balance sheet items impacting cash flows.

This integrated view helps stakeholders understand a company’s financial health.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the differences between accrual and cash accounting, emphasizing the importance of understanding GAAP.

He highlighted that accrual accounting matches revenues and expenses to the time of the transaction, providing a more accurate picture of a company’s financial position.

This method forms the basis for preparing the income statement and balance sheet, eliminating timing differences.

He contrasted this with cash accounting, which only recognizes transactions when cash is exchanged, noting its importance for cash flow management.

The instructor also stressed that large and public companies use accrual accounting for consistency and comparability.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the income statement, also known as the profit and loss account, highlighting its importance in financial analysis.

He emphasised that it is not a cash statement but an accounting standards-based statement showing profit and loss over time.

He detailed the key headings, including revenues, costs of goods sold, gross profit, operating expenses, and net income.

The instructor explained the time element of the statement and various profit measures like EBITDA and EBIT.

He also discussed other expenses and income tax, concluding with net profit and its role in retained earnings.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained how to build an income statement, detailing each component and its significance.

He highlighted the steps involved, starting with determining the reporting period and calculating revenue.

The instructor then described how to compute the cost of goods sold (COGS) and gross profit.

He emphasized the importance of subtracting operating expenses to find the operating income and including non-operating items for a complete picture.

The process culminates in calculating net income, providing an accurate view of financial performance.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the key sections of the income statement, including revenue, cost of goods sold (COGS), gross profit, operating expenses, and operating income.

He detailed other income sources, pre-tax income, income tax, and net income.

The instructor highlighted the calculation methods for each section, such as revenue being summed from sales invoices and COGS calculated as beginning inventory plus purchases minus ending inventory.

He emphasized the importance of the income statement in tracking a company's financial performance, profitability, and operational efficiency over a specific period.

The statement uses accrual accounting to record income and expenses.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor introduced the balance sheet, explaining that it shows a company's assets and how they are financed through equity and debt at a fixed point in time.

He detailed its organization into two sides: assets on the left and liabilities plus stockholders' equity on the right.

The instructor emphasized that assets should balance with the total of liabilities and equity.

He described current and non-current assets and liabilities, and explained stockholders' equity.

He also discussed the balance sheet's importance in assessing liquidity, leverage, efficiency, and rates of return.

Finally, he stressed understanding its structure and the necessity for it to always balance.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor detailed the main sections of the balance sheet: assets, liabilities, and equity.

He explained that assets are resources owned by the company, including current assets like cash and long-term assets like property.

Liabilities are obligations owed to creditors, divided into current liabilities, such as accounts payable, and long-term liabilities, like bonds payable.

Equity represents the residual interest in the assets after deducting liabilities, including common stock, preferred stock, and retained earnings.

He emphasized that the balance sheet provides a snapshot of the company's financial position at a specific point in time, showing what it owns and owes.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

4o

The instructor introduced the cash flow statement, emphasizing the importance of cash management for a business.

He explained that while the balance sheet and income statement are prepared using accrual accounting, the cash flow statement reconciles these with actual cash movements.

The cash flow statement is divided into three key sections: cash from operations, cash from investing, and cash from financing.

He detailed how net cash flow is calculated by adjusting net income for non-cash charges and changes in working capital, investments, and financing activities.

The instructor stressed the critical role of understanding cash flow for business survival.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained the main sections of the statement of cash flows: cash from operating activities, investing activities, and financing activities.

He highlighted that cash from operating activities includes cash flows from core business operations, adjusted for non-cash items and changes in working capital.

Cash from investing activities covers cash flows from the acquisition and disposal of long-term assets.

Cash from financing activities involves cash flows related to equity and debt, including dividends paid and funds raised.

He emphasized that the cash flow statement tracks the movement of cash in and out of the business, providing insights into liquidity and solvency.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor explained various cash flow metrics, emphasizing the importance of being precise about their meanings and uses.

He introduced EBITDA, cash flow from operating activities, free cash flow, free cash flow to equity, and free cash flow to the firm.

He explained that EBITDA is a popular but imperfect proxy for cash flow, while cash flow from operations includes changes in working capital.

Free cash flow is operating cash flow minus capital expenditures, and free cash flow to equity also accounts for net debt changes.

Finally, free cash flow to the firm is used in enterprise valuation and discounted cash flow models, despite being complex to calculate.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The instructor introduced a case study using Apple’s financial statements from their 10-K report.

He showed the income statement, balance sheet, and cash flow statement, highlighting their real-life presentation.

The income statement included sales, cost of sales, operating expenses, and operating income, along with earnings per share calculations.

The balance sheet displayed current and non-current assets, liabilities, and shareholders' equity.

The cash flow statement detailed cash from operations, investing, and financing activities, showing net changes in cash.

He emphasized the importance of understanding these statements and provided them for download for further study.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

Working Capital is a critical concept in finance, understanding financial statements and business analysis so we are going to explore the topic in this section in some detail.  We start by defining exactly what we mean by working capital.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

The Working Capital Cycle explains the relationship between Inventory, Accounts Receivable and Accounts Payable.  We explain the cycle in this lecture, how to calculate it and why it is critical to the ongoing liquidity of the company.  We also explain how the Working Capital Cycle becomes part of a Financial Model input when creating models which forecast the future performance of a company.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

Now we turn our attention to the implications of working capital management and its components.  The four elements of working capital management are:

• Cash

• Inventories

• Receivables

• Payables

We discuss the implications for the company of failing to manage these and some of the systems that exist to optimise working capital management.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

Working Capital Analysis is a practical day to day activity for every CFO to ensure that there is always sufficient working capital in the company to meet liabilties.  The lecture explains this process step by step. 

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

Working Capital Ratios are financial tools which you can use to interpret the relationship of assets and liabilities in the working capital equation.  The lecture explains these ratios and how to apply them.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

These are common sense safe guards for every business to apply. By having Working Capital Policies in place a business can limit the risk that they have a liquidity crisis through poor management.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

In this section we have created a framework for understanding and managing working capital and its provides you with the essential framework to help you develop your understanding of financial statements and how working capital fits into financial modelling and corporate finance transactions.

A PDF of the Slide Deck is available to download in the Resources Section of this lecture.

Section Learning Objective: To understand the key financial ratios that apply to the Income Statement, the Balance Sheet and the Cash Flow statement to enable you to interpret the financial information in these statements.

Section Introduction

Now we move from understanding to analysis, from comprehension to interpretation. We introduce the major ratios for the three main financial statements and, to look ahead a little, we also bring in some valuation ratios as these seem to fit well here.

Both on their own, and by using ratios which reach across the three financial statements, you will be able to ask and answer strategic questions about performance, liquidity and efficiency and growth.

At the end of this Section...

At the end of this section you will understand the power of the financial ratio analysis and the fact that it enables you to make comparisons between one company and another, even if they differ widely in many aspects of their business. Learn to listen to what the numbers tell you.

Financial Analysis is the analysis of a company and its performance using financial and numerical data. This involves working with historic data and creating an integrated financial model to forecast future performance.

12 Types of Financial Analysis

1. Vertical

2. Horizontal

3. Leverage

4. Growth

5. Profitability

6. Liquidity

7. Efficiency

8. Cash Flow

9. Rates of Return

10. Valuation

11. Scenario and Sensitivity

12. Variance

A PDF of the Slide Deck may be downloaded from the Resources Section of this Lecture

The first group of Financial Ratios are the Measures of Profitability and we are going to look at these in a little detail in this lecture.  They are focused on the Income Statement/Profit and Loss Account although we do draw on the Balance Sheet for two of the ratios.

A PDF of the Slide Deck as well as the Financial Statement Images are included to download in the Resources Section of this lecture.

Balance Sheet ratios measure the operational efficiency of a business

These are divided into:

• Liquidity ratios

• Leverage ratios

• Operating Efficiency Ratios

We look at each of these groups to see what we can learn about the business and how you can use these ratios to improve business operating efficiency.

A PDF of the Slide Deck may be downloaded from the Resources Section of this Lecture

The Cash Flow Statement is less useful for direct ratio analysis but it provides a considerable amount of useful information about the business if we know how to read and interpret it.  We can also use if for horizontal time based analysis too of course.

A PDF of the Slide Deck may be downloaded from the Resources Section of this Lecture

Valuation Ratios are very helpful for management and investors to measure the value of the company and its common stock.  These are widely used and you need to understand them.

A PDF of the Slide Deck may be downloaded from the Resources Section of this Lecture

Section Learning Objective: Use a real Case Study to analyse real financial information using the Ratio Analysis explained in the previous section. This is followed by a discussion of the Case Study and its results.

Section Introduction

We follow up the previous section on Ratio Analysis with a detailed Assignment to help you to use what you have just learned using the figures from a real company - yes we are back at Apple.

Once you have completed the Assignment and marked yourself, I will take you through the Assignment one statement at a time and help you to further understand what these ratios are telling you.

At the end of this Section...

At the end of this section you will feel confident enough to open any 10k Report or a Report and Accounts in the UK and do your own financial analysis. This will empower you to measure performance of strategy against objectives and ask all the difficult questions you like.

Prepare a professional Financial Analysis from Apple's audited financial statements using the spreadsheet provided for you and then answer the 21 questions relating to the financial ratios you will have calculated in the spreadsheet.

Open the excel  file attached below.  Apple Inc Case Study Financial Analysis Assignment.xls

It has four sheets.  They are:

1. Income Statement

2. Balance Sheet

3. Cash Flow

4. Ratio Analysis

I have entered the financial information from the Apple financial statements into the first three sheets - that is all done for you.

You need to focus on the fourth sheet - Ratio Analysis

This sheet contains the inputs for creating the financial analysis for this assignment.  All the input cells are in green.  You need to enter a "=" and then select the correct cell for the inputs from the financial statements.  When you have completed this correctly, the spreadsheet will calculate all the financial ratios for you.

You will then have a spread sheet which you can use to answer the questions in the assignment.

Here is the solution to the Assignment in the form of a completed spreadsheet which you can download and use.  I do hope you spent time on the assignment as there is no substitute for experience but I wanted to make sure that you had a completed spreadsheet.  The Statements are also included in the Slide Deck and you can download the Slide Deck PDF from the resources section too. 

This lecture covers a detailed discussion of the Measures of Growth Financial Analysis from the Assignment to make sure that you understand what we are calculating and why we are calculating it.

A PDF of the Slide Deck along with a screenshot of the Measures of Growth Spreadsheet are available to download from the Resources Section of this lecture.

This discussion focuses on the second of our two groups of ratios and we are looking at Returns on Capital and Gearing.  These help us to understand both the performance of the firm and the level of financial risk.

A PDF of the Slide Deck along with a screenshot of the Measures of Profitability Spreadsheet are available to download from the Resources Section of this lecture.

This discussion focuses on the three measures of Trading Performance that we produced in the Assignment.  This discussion is designed to ensure that you properly understand what these are and what they are telling you about a business.

A PDF of the Slide Deck along with a screenshot of the Measures of Trading Performance Spreadsheet are available to download from the Resources Section of this lecture.

We conclude this discussion of the financial analysis in the Assignment by looking at the Working Capital ratios measuring capital liquidity and efficiency.

A PDF of the Slide Deck along with a screenshot of the Measures of Working Capital Performance Spreadsheet are available to download from the Resources Section of this lecture.

Before discussing Financial Ratios in Corporate Finance, let us briefly discuss exactly what we mean by Corporate Finance - the finance of Corporations.  The concerns of Corporate CFO's reflect their responsibility for the Finance Function and it follows that they will use Ratio Analysis to aid them in their understanding and management of this complex department.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

Corporate Finance Ratios help us to examine four areas of a business; Liquidity, Operational Risk, Profitability and Efficiency.  This section introduction explains how this helps us in our evaluation of a business.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

Liquidity Ratios in Corporate Finance enable us to ask specific questions about the liquidity of a firm:

• Can the business meet its short term liablities?

• How much surplus cash does the company have over and above its need to meet its short term liabilities?

• Critically assess the company’s cash management strategy

In this lecture we discuss six ratios which help us to do this.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

We need to understand how much operational risk the company faces as a result of its financial structure.  What if something goes wrong operationally?  How would this impact the business and would the company survive.  In the middle of the Coronavirus Pandemic this is a very valuable question to be able to answer.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

We want to understand whether the firm can make profits from its business model.  Does it use its assets effectively?  By using Profitability Ratios, we can evaluate this.  Furthermore by looking at trends over time and similar competing firms we can discover a great deal of useful information about how well the company is doing as well as whether the management are running the business efficiently.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

We want to understand how well our business is being run, so we turn to Efficiency Ratios.  These enable us to understand the level of efficiency in the business and whether there might be room for improvement.  Trend analysis can be very valuable here and of course, you can benchmark your business against that of your competitors.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

This section takes a close look at Modelling in the Mergers and Acquisitions process.  By way of introduction, I want to explain to you why we spend so much time with financial models and how the models inter-relate to one another.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

In order to conduct your Financial Modelling you will need to know how to construct three different financial models.

These are:

The Integrated Financial Statements Model

The Cash Flow Model

The Merger Model.

This lecture explains what these do and why you need them.  I reinforce the point that this course is NOT a modelling course but understanding the financial modelling of the deal is important.  Ideally you will have an analyst available to do your modelling for you.

A PDF of the Slide Deck is available to download from the resources section of this lecture.

This lecture explains how this model integrates to reflect movements in cash within the business and ensures that all three statements in the model appropriately reflect these changes without creating circularity in the model.

A PDF of the Slide Deck is available to download from the resources section of this lecture.

I realised that after creating the previous lecture, a more diagramatic explanation would be helpful so this is a further explanation of the Integrated Financial Statements Model, this time with diagrams showing how the cash moves around the model.  I hope you find that this helps to reinforce what I am trying to explain.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

If you want to consider creating your own Integrated Financial Statements model, here are some quick tips to putting it together.

A PDF of the Slide Deck is available to download from the resources section of this lecture.

This is the primary valuation technique used by Investment Banks to value companies and its important that you at least understand what it is and how it works, even if you have no intention of creating one yourself.  In this lecture, I explain the main characteristics of the model and how it works.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

I have included this lecture to spend some time explaining the Discounted Cash Flow formula. If you are not a Math's Wizard (and few of us are) this can be confusing and its important that you grasp the essential details of the DCF.  I also include a simple example to show how this works.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

The Merger Model is a critical part of the Mergers and Acquisitions process and helps you to analyse and evaluate the deal on the table.  It is often used as the basis of the price negotiation.  In this lecture I explain what the Merger Model is and the key steps to creating it.  We conclude with a discussion Earnings Per Share and why the Merger Model is so critical in its evaluation.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

Congratulations on completing the Course.  In this lecture we summarise the ground covered from initialising an understanding of accounting principles to the analysis and use of financial statements in financial modelling and M&A.

A PDF of the Slide Deck is available to download from the Resources Section of this lecture.

A free thank-you for finishing this course.

In this short bonus lecture I introduce The IB Skills Roadmap — a 43,000-word, practitioner-authored guide to the complete investment banking skill set. Fifteen-plus critical skills, one page each, and for every skill the single most common mistake practitioners make on a live deal.

It is genuinely free. No upsell, no catch.

What you will learn in the next 3 minutes:

• Why finishing one course is only the first step in building a complete IB skill set

• What sits inside The IB Skills Roadmap — and who it is written for

• How to use it as a self-diagnostic to find your weakest skill

• How to download it directly from my Payhip storefront

The download link is in the Resources section of this lecture.

About John Colley Cambridge University MA · Bayes Business School MBA with Distinction · 30+ years across investment banking, M&A and private equity since 1988. Author of The Investment Banking Practitioner's Handbook Series