Five Key Methods of Analyzing Financial Statements

Agenda

Introduction

• Brief Introduction of Financial Statements
• Who Issues Financial Statements and Why
• Why Are Financial Statements Analyzed
• Five Methods of Analyzing Financial Statements

Horizontal and Vertical Trend Analyses

• Vertical Trend Analysis
• Horizontal Trend Analysis

Financial Ratio Analysis

• Assesses and/or Measures the Relationships Among Different Financial Statement Items and Between These Items and Non-Financial Information Performing This Analysis Can Assist in:
• Highlighting Relationships Between Financial Statement Items
• Highlighting Unexpected Changes in Single and/or Multiple Items
• Providing Useful Information to Compare One Entity to Others Within Its Industry to Assist in Evaluating Performance
• These Ratios Can Then Be Compared on a Historical Basis Within the Entity or Against an Industry Benchmark
• Risk Management Association Compiles Comparative Historical Data on a Number of Industries (Annual Statement Studies)
• Integra Information© Provides Business Valuation and Analysis Data on a Number of Industries
• Examples of Types of, and Specific, Ratios Include:
• Liquidity, Profitability and Leverage Ratios

Analysis of Individual Statements/Analysis of the Statement of Cash Flows

• When Does a Company Have Enough Cash?
• When It Has Enough Cash to Pay ShortTerm Liabilities
• When Does a Company Have Too Much Cash?
• When the Company Has High Cash Balances on Its Balance Sheet (High Liquidity Ratios)

Data Mining Consists of Queries or Searches Performed Within Accounts (or Other Data) to Identify Anomalies Within the Accounts/Data - Examples of Data Mining Analysis Include:

• Listing a Group of Accounts by Size
• Identifying and Reviewing All New Suppliers
• Identifying Gaps in Check Numbers
• Identifying Duplicate Invoice Numbers or Payments
• Testing Transactions for Proper Cut-Off Dates
• Comparing Recent Prices With Actual Inventory Costs

Detailed Forensic Accounting (Under Development)

Credits

Faculty

Michael D. Pakter, CPA, CFE, CA

Gould & Pakter Associates, LLC

• Managing member of Gould & Pakter Associates, LLC
• More than 40 years of experience in accounting and forensic accounting, business economics and investigations in numerous industries and diverse engagements, including more than 20 years of experience in determining economic damages and performing business valuations
• State, federal and bankruptcy courts, as well as arbitral bodies, have recognized him as an expert in accounting, financial analysis, forensic accounting, economic damages, business valuation and business economics
• Certified Public Accountant registered and licensed in the State of Illinois
• The American Institute of Certified Public Accountants has recognized him as additionally Certified in Financial Forensics (CFF) and as a Chartered Global Management Accountant (CGMA)
• He earned the National Association of Certified Valuators and Analysts (NACVA) Certified Valuation Analyst (CVA) designation having completed its business valuation specialty program and earned its Master Analyst in Financial Forensics (MAFF) designation
• The Association of Insolvency and Restructuring Advisors (AIRA) has awarded him its Certified Insolvency and Restructuring Advisor (CIRA) certificate and its Certification in Distressed Business Valuation credential (CDBV); he is a Certified Fraud Examiner (CFE) and earned a Chartered Accountant (CA) credential