The Language and Tools of Financial Analysis

Go to Course: https://www.coursera.org/learn/financial-analysis

Introduction

### Course Review: The Language and Tools of Financial Analysis #### Overview Are you interested in understanding the financial world in which corporations operate? Do you want to develop a strong foundation in accounting principles and financial analysis? If so, "The Language and Tools of Financial Analysis" is the course for you. Offered by the University of Melbourne in partnership with Bank of New York Mellon (BNY Mellon) on Coursera, this course serves as the first of four in the Specialization on Essentials of Corporate Financial Analysis and Decision-Making. #### Course Highlights **1. Comprehensive Syllabus** This course takes a systematic approach to financial analysis, starting from accounting principles and culminating in advanced valuation techniques. The structured syllabus encourages both theoretical understanding and practical application, ensuring participants can navigate the complexities of financial data with confidence. **2. Real-World Examples** One of the most effective teaching methodologies employed in this course is the use of actual financial statements from Kellogg's. Through real-world examples, learners can relate theoretical concepts to practical applications, facilitating deeper understanding and retention of knowledge. **3. Key Areas of Study** - **Introduction to Accounting Principles**: This module explains the fundamental financial statements and key accounting concepts. The content is accessible for learners with various foundational knowledge levels. - **Financial Analysis Techniques**: It delves into ratio analysis, enabling participants to evaluate profitability, leverage, efficiency, and liquidity. This practical approach equips you with tools essential for effective financial analysis. - **Linking Accounting to Corporate Decision-Making**: This week focuses on the pitfalls associated with financial statement analysis, particularly emphasizing the importance of critical thinking in financial decision-making. - **Discounted Cash Flow Analysis**: The final module introduces more advanced valuation techniques, allowing participants to assess the time value of money in financial decision-making. #### Learning Experience The course is not only informative but also engaging. The instructors present content in a clear and approachable manner, often using visuals and real-case studies to maintain interest. Also, the community aspect of Coursera allows participants to interact with peers, share insights, and enhance their learning experience through discussions and feedback. #### Who Should Enroll? This course is highly recommended for aspiring financial analysts, investment professionals, and anyone with a keen interest in corporate finance. It is suitable for beginners and those wishing to refine their understanding of financial analysis techniques. Whether you come from a finance background or are completely new to the field, the structured curriculum is designed to support your learning journey. #### Recommendations **Pros**: - Structured content that builds from foundational principles to advanced techniques. - Use of actual data and case studies enhances practical understanding. - Interactive discussion forums foster a rich learning community. **Cons**: - Some learners may find the pace challenging, especially those new to finance concepts. Therefore, it may be beneficial to take the time to review supplementary materials for a more comprehensive understanding. #### Conclusion Enrolling in "The Language and Tools of Financial Analysis" provides invaluable insights into corporate finance and lays a solid groundwork for further studies in this specialization. By the end of the course, you’ll not only grasp essential concepts but also be equipped to apply them in real business scenarios. If you’re ready to embark on a valuable learning journey that will elevate your financial literacy and analytical skills, I wholeheartedly recommend signing up for this course on Coursera. Don't miss the opportunity to immerse yourself in the language of finance—it could very well chart the course for your career in this dynamic field! Watch the [MOOC promotional video](http://tinyurl.co) to get a sneak peek! Happy learning!

Syllabus

An Introduction to Accounting Principles: The Language of Capital Markets

This week we will define and explain the key financial statements produced by a company and reported to its shareholders. We will discuss the different core elements within those statements following basic accounting principles with the discussion framed in reference to excerpts from the actual financial statements produced by the US-listed food company Kellogg's.

Understanding the importance and the accounting principles underpinning the key financial statements of a company, we now turn our attention to synthesizing and condensing the financial statement information for the purpose of financial analysis. Specifically, we demonstrate how financial analysts use ratio analysis to measure relative profitability, leverage, efficiency and the liquidity of a company. Again, we utilise information from the financial statements of Kellogg's and its competitor Kraft to demonstrate these financial analysis techniques.

Having established initial basic financial analyst's toolset in the first two weeks of this course, some caution is warranted as we turn our attention to some of the pitfalls associated with uncritical use of financial statements by analysts. Specifically, we highlight how the use of historical cost and accrual-based accounting might lead to sub-optimal corporate financial decision-making. We then discuss how the agency relationship between management and the owners of a company may also lead to poor corporate decision-making. We conclude with a cautionary tale of misleading accounting practices and the regulator's response to these cases.

Having identified the key elements of a company's financial statements, and the way in which information from these statements can be utilized in financial analysis, we shift our focus this week to discounted cash flow (DCF) analysis. Sound financial decision-making by CFOs and investors, requires an assessment of future (uncertain) financial outcomes. DCF analysis allows the financial analyst to extrapolate the financial statement information in a forward-looking manner. The DCF technique provides an objective way in which we can evaluate financial decisions while overcoming many of the shortcomings associated with standard ratio analysis.