Financial Statement Analysis and Forecasting

This unit develops students’ ability to deconstruct and interpret financial statements, trace how transactions drive the balance sheet and cash flows, and build reliable short-term forecasts. Students will learn to compute and benchmark key ratios, assess disclosures and accounting policies, and recognize practices that distort reported results in order to inform capital decisions.

Learning Objectives

• Analyze income statement and balance sheet components to identify profit drivers, reconcile profit with free cash flow, and explain differences between earnings and cash generation
• Evaluate liquidity, solvency, and performance using benchmark financial ratios and trend analysis, including effects of inventory costing, production decisions, and manufacturing activities
• Apply double-entry accounting and revenue/expense recognition principles to record transactions, calculate cost of goods sold and inventory valuations, and determine their impacts on financial statements and cash flows
• Demonstrate the ability to assess footnotes, MD&A, disclosures, and accounting policy choices to detect potential earnings management, understand limitations of the statement of cash flows, and evaluate implications for raising debt and equity capital