Learning Exercise 1

Session 2: Analysis of Liquidity
• Definition and importance of liquidity
• Current and acid-test ratios
• Working capital analysis and working capital strategies
• Cash flow cycle and activity ratios
• Free cash flow and analysis of the cash flow statement
• Trend analysis of liquidity
• Impact of analysis on working capital decisions

Session 3: Analysis of Long-term Solvency and Capital Structure
• Difference between and relation of liquidity and solvency
• Debt ratio and debt-to-equity ratios
• Debt coverage ratios
• Degree of financial leverage
• Trend analysis of solvency
• Cost of capital
• Impact of analysis on capital structure decisions

• 

  Jesse Rey L. Meneses

Session 4: Analysis of Profitability and Market Tests
• ‘Accounting’ and ‘economic’ measures of profitability
• Rates of return on assets and on equity
• Du Pont model of profitability analysis
• Profit margins
• Degree of operating leverage
• Other metrics
• Economic value added
• Diagnosing profitability and growth, and decisions affecting profitability

Module 5: Final Analysis and Integration
• Linking results of financial analysis to decisions:
 Investment
 Financing
 Operational
 Strategic
• Financial ratios for specialized industries
• Overview of fundamental analysis
• Final recap and review

• 

  Jesse Rey L. Meneses