Analysis of the Balance Sheet

This tutorial looks at the balance sheet and provides a ‘snapshot’ of an organization at a particular point in time. It indicates the organization’s financial strength, providing information about what it owns (assets), what it owes (liabilities), and the ‘book value’ of the business. Ratio analysis can also be performed on the balance sheet in order to gain valuable insight into the organization’s performance.

This Tutorial introduces :-

– The various elements that make up a balance sheet
– Where the elements are on a balance sheet
– Consolidated balance sheets
– Balance sheet ratio analysis

On completion of this tutorial, you will be able to:-
– Identify the different types of asset and liability and the components of shareholders’ equity
– consolidate a company’s balance sheet
– perform ratio analysis of balance sheet items

Analysis of the Cash Flow Statement

Using balance sheets and income statements, accountants are able to draw up cash flow statements that detail the areas where cash is being generated and ‘burned’ by a business. This is of crucial importance as it gives the users of accounts essential ‘supplementary’ information on which to base their decisions. The cash flow statement, while not a headline accounting statement, details how well cash is being managed and focuses the investment mind on the adage that ‘cash is king’.

The prerequisite for this module is: Analysis of the Balance Sheet and Analysis of the Income Statement Tutorials

This also available as part of the Accounting Course

This tutorial explains:-

– The important difference between cash and profit
– It shows how to classify activities in a cash flow statement
– How to prepare and interpret such statements
– The limitations of cash flow statements are also explained
– The relationship between working capital and cash flow
On completion of this tutorial, you will be able to:-

– Identify the importance of cash to a business
– prepare a cash flow statement
– interpret a cash flow statement
– identify how entities can maintain a strong liquidity position with proper working capital management

Analysis of the Income Statement

Users of financial statements attach great importance to the income statement (or P&L) statement. It’s easy to see why; the income statement shows a company’s revenue, its expenditure incurred in earning that revenue, and, finally, its net income or profit.

A company’s net income is an important indicator of its long-term prosperity and ability to create shareholder value. Investors, analysts, and other interested parties should not focus on income exclusively: depending on accounting policies employed, the effect on reported income in the financial statements can be significant.

The Prerequisite for this module is: Accounting – An Introduction.

This module is also part of the Accounting Course

This tutorial introduces :-

– The various elements of the income statement, enabling you to look behind the key figures. With this knowledge, you should be able to make an informed judgment on a company’s performance.
On completion of this tutorial you will be able to:

– Identify the key elements of the income statement
– Calculate key ratios associated with the income statement