The nature of financial analysis

• List the principal questions answered by financial analysis
• Identify the financial statement sources of data used in financial analysis
• List the major tools used in financial analysis

The planning cycle

• Identify components of the planning cycle
• Describe the role of the financial analyst

Income statement and balance sheet

• Identify key accounts and subtotals of the income statement
• Identify the major sections of the balance sheet and how analysts use them
• Explain why companies own assets and how they pay for them
• Use common size financial statements

Measurement of performance

• Calculate the solvency ratios, liquidity ratios, and profitability ratios
• Explain how ratios relate to the creation of shareholder value
• Define how growth rates are used to indicate performance

Cash Flow

• Analyze a company’s gross cash flow from operating, investing, and financing activities
• Describe why a financial analysis that fails to take cash flow into account is inadequate
• Define a company’s free cash flow
• Use cash flows in measuring the  value added

Creating shareholder value

• Calculate a company’s weighted average cost of capital and total capital in accordance with CAPM
• Use bond rating information to manage leverage