Financial Analysis
Key Learning Points:
• Part one Understanding core financial statements and their interrelationships.
Performing key financial ratio analysis for performance evaluation.
• Part two Assessing business viability and investment attractiveness. Preparing
compelling loan applications.
• Part three Evaluating strategic initiatives through cost-benefit analysis.
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Analyzing Your Business Financial Health
Now that you understand the three main financial statements, it's time to use them to gain insights into your business's financial health. We'll use financial ratios, which are powerful tools to compare different aspects of your statements and identify trends.
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Main Quiz
Overall Course Quiz
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Online Self-Assessment Checklist
Use this checklist to assess your readiness to apply financial analysis in your business. Tick 'Yes' if you feel confident, 'No' if you need more practice.
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Key Learning Points
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Glossary of Key Terms
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Investment Readiness: Pitch Decks & Loan Applications
● Start Here: Begin by reviewing the Module Introduction to understand the scope.
● Navigate Lessons: Each lesson provides objectives, definitions, examples, and mini-quizzes.
● Complete Templates: Utilize provided tools and templates to apply concepts.
● Review Case Studies: Analyze real-world scenarios to deepen understanding.
● Take Quizzes: Test your knowledge with online mini-quizzes throughout and a comprehensive main quiz at the end.
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Cost-benefit analysis of adding after-sales service
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Cash flow is generally categorized into three main types of activities:
- Operating Activities: These cash flows tell you how much cash the company generated from its core business, as opposed to its peripheral activities such as investing or borrowing. It paints the best picture of how well a firm’s business operations are producing cash that will ultimately benefit shareholders.
- Common Cash Inflows: Cash sales, payments received from customers for credit sales, interest received.
- Common Cash Outflows: Payments to suppliers and creditors, wages and salaries to employees, rent payments, utility payments, tax payments.
- Note: Often, the “Indirect Method” is used, starting with Net Income (from the Income Statement) and then adjusting for non-cash items (like depreciation) and changes in working capital (like accounts receivable/payable).
- Investing Activities: These reflect cash inflows or outflows related to the purchase and sale of long-term assets.
- Common Cash Inflows: Money received from selling equipment, property, or investments.
- Common Cash Outflows: Payment for business acquisitions, purchase of new property, plant, and equipment (like new machines or a delivery vehicle for your business).
- Financing Activities: These represent the cash inflows and outflows related to transactions with the providers of finance (owners/shareholders and banks/financiers).
- Common Cash Inflows: New loans received from banks, grants received, additional equity paid in by the owner.
Common Cash Outflows: Repayment of loan principal, payments for dividends (if you pay yourself a share of profits), payments to reduce owner’s capital.