Financial Statement Analysis

CFA Level I — Exam Weight: 11-14%

9

Modules

46

Concepts

31

Formulas

29

Quiz Questions

Modules in Financial Statement Analysis

9 learning modules covering 11-14% of the CFA Level I exam.

1

Introduction to Financial Statement Analysis

6 concepts 3 questions
2

Analyzing Income Statements

6 concepts 6 formulas 4 questions
3

Analyzing Balance Sheets

5 concepts 4 formulas 3 questions
4

Analyzing Statements of Cash Flows I

6 concepts 3 formulas 4 questions
5

Analyzing Statements of Cash Flows II

3 concepts 5 formulas 2 questions
6

Analysis of Inventories

5 concepts 4 formulas 4 questions
7

Analysis of Long-Term Assets

5 concepts 4 formulas 3 questions
8

Topics in Long-Term Liabilities and Equity

4 concepts 2 formulas 3 questions
9

Analysis of Income Taxes

6 concepts 3 formulas 3 questions

Key Formulas

14 essential formulas for Financial Statement Analysis.

Basic EPS

EPS = (NI - Pref Div) / Wtd Avg Shares

Earnings per common share

Diluted EPS

Diluted EPS = (NI - Pref Div + Convertible Interest) / (Shares + Dilutive Securities)

Treasury stock method for options

Current Ratio

Current Ratio = Current Assets / Current Liabilities

>1 indicates short-term solvency

Quick Ratio

Quick = (Cash + Receivables + ST Investments) / Current Liabilities

Excludes inventory

ROE

ROE = Net Income / Average Equity

Return to shareholders

DuPont (3-way)

ROE = (NI/Rev) × (Rev/Assets) × (Assets/Equity)

Profit margin × Turnover × Leverage

DuPont (5-way)

ROE = Tax Burden × Interest Burden × EBIT Margin × Turnover × Leverage

Extended decomposition

Inventory Turnover

Inv Turnover = COGS / Avg Inventory

Days = 365 / Turnover

DSO

DSO = 365 / Receivables Turnover

Receivables Turnover = Revenue / Avg AR

Debt-to-Equity

D/E = Total Debt / Total Equity

Financial leverage measure

Interest Coverage

Interest Coverage = EBIT / Interest Expense

Ability to service debt

CFO (Indirect)

CFO = NI + Non-cash charges ± WC changes

Start from net income, adjust

Free Cash Flow to Firm

FCFF = NI + NCC + Int(1-t) - FCInv - WCInv

Cash available to all capital providers

Free Cash Flow to Equity

FCFE = FCFF - Int(1-t) + Net Borrowing

Cash available to equity holders

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