Financial Accounting Part 2

Take a deeper dive into the world of financial accounting. Learn about financial ratio analysis, forecasting financial statements, cash flow analysis, and more.

While their products and services may differ wildly, successful companies have at least one thing in common: they're savvy with a financial report. Financial statements and reports allow accounting and finance professionals to peer into the inner workings of their organization, pinpointing key areas of risk before they evolve into issues that steer the company off course. In this course—the second installment in the Financial Accounting series—accounting professors Jim and Kay Stice take a deeper dive into the world of financial accounting. Jim and Kay discuss financial ratio analysis, cash flow analysis, forecasting financial statements, business valuation, and more. To wrap up the course, they use the different models covered in the course to estimate the value of McDonalds.

Introduction

• Financial analysis, cash flow analysis, and valuation

1. Quick Review of Financial Statements

• Who uses financial statements?
• Review of the balance sheet
• Review of the income statement
• Review of the statement of cash flows

2. Analyzing Financial Statements

• What is financial ratio analysis?
• Comparing financial statements across time
• Comparing financial statements across companies
• Common-size financial statements

3. Ratio Analysis: DuPont Framework

• Gunpowder, the French Revolution, and the DuPont framework
• Ratio analysis
• Return on equity
• DuPont framework
• Current ratio
• Debt ratio
• Price-earnings ratio
• Real world: Apple vs. Google vs. Microsoft

4. Ratio Analysis: The Operating Cycle

• Nike, McDonald’s, and the operating cycle
• The operating cycle
• Days sales in inventory
• Average collection period
• Days purchases in payable
• Real world: Procter & Gamble

5. The Statement of Cash Flows

• Jim Stice operating cash flow matrix and a wife named Kay
• Analyzing cash flows
• What does it tells us?
• Cash flow patterns
• One method of analysis
• Two methods for presentation

6. Forecasting Financial Statements

• Forecasting the financial statements of Home Depot
• What causes financial statement amounts to change?
• The initial assumptions
• Forecasted income statement
• Forecasted retained earnings
• Forecasted assets
• Forecasted liabilities and equity

7. Intro to Business Valuation

• The intersection of accounting and finance
• Value is based on expectations about the future
• Overview of the market approach: Using multiples
• Overview of the cost approach: Depreciated replacement cost
• Overview of the income approach: Discounted cash flow

8. Valuation: Using Multiples

• The Microsoft IPO
• Simple illustration: Valuation of 69 Blaine Avenue
• Earnings multiples
• Equity multiples
• Sales multiples
• Other multiples: The case of WhatsApp

9. Valuation:Free Cash Flows

• Buying the Hong Kong car?
• Basic idea: Cash flows, timing, and risk
• Risk and interest rates
• Forecasting cash flows
• Simple discounted cash flow valuation example

10. Valuation: Comparing Models

• Brief McDonald's history
• McDonald's: The numbers
• McDonald's: Dividend-based valuation
• McDonald's: Earnings multiple
• McDonald's: Discounted cash flow valuation
• McDonald's: Lessons from a comparison of the models

Conclusion

• Next steps

Introduction

• Financial analysis, cash flow analysis, and valuation

1. Quick Review of Financial Statements

• Who uses financial statements?
• Review of the balance sheet
• Review of the income statement
• Review of the statement of cash flows

2. Analyzing Financial Statements

• What is financial ratio analysis?
• Comparing financial statements across time
• Comparing financial statements across companies
• Common-size financial statements

3. Ratio Analysis: DuPont Framework

• Gunpowder, the French Revolution, and the DuPont framework
• Ratio analysis
• Return on equity
• DuPont framework
• Current ratio
• Debt ratio
• Price-earnings ratio
• Real world: Apple vs. Google vs. Microsoft

4. Ratio Analysis: The Operating Cycle

• Nike, McDonald’s, and the operating cycle
• The operating cycle
• Days sales in inventory
• Average collection period
• Days purchases in payable
• Real world: Procter & Gamble

5. The Statement of Cash Flows

• Jim Stice operating cash flow matrix and a wife named Kay
• Analyzing cash flows
• What does it tells us?
• Cash flow patterns
• One method of analysis
• Two methods for presentation

6. Forecasting Financial Statements

• Forecasting the financial statements of Home Depot
• What causes financial statement amounts to change?
• The initial assumptions
• Forecasted income statement
• Forecasted retained earnings
• Forecasted assets
• Forecasted liabilities and equity

7. Intro to Business Valuation

• The intersection of accounting and finance
• Value is based on expectations about the future
• Overview of the market approach: Using multiples
• Overview of the cost approach: Depreciated replacement cost
• Overview of the income approach: Discounted cash flow

8. Valuation: Using Multiples

• The Microsoft IPO
• Simple illustration: Valuation of 69 Blaine Avenue
• Earnings multiples
• Equity multiples
• Sales multiples
• Other multiples: The case of WhatsApp

9. Valuation:Free Cash Flows

• Buying the Hong Kong car?
• Basic idea: Cash flows, timing, and risk
• Risk and interest rates
• Forecasting cash flows
• Simple discounted cash flow valuation example

10. Valuation: Comparing Models

• Brief McDonald's history
• McDonald's: The numbers
• McDonald's: Dividend-based valuation
• McDonald's: Earnings multiple
• McDonald's: Discounted cash flow valuation
• McDonald's: Lessons from a comparison of the models

Conclusion

• Next steps