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Introduction to Financial Analysis

A full university text on reading financial statements: ratio analysis, forecasting, the time value of money, and interest rates, valuation and return.

150 chapters · 50,729 words · readable here

How it fits here. The fundamental-analysis counterpart to our technical pages. Everything here applies to reading a NEPSE company's reports — the statements are the same shape; only the regulator differs.

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Part I. Financial Statements and Ratio Analysis and Forecasting

  1. 1.2: The Corporation390 words
  2. 1.3: Business / Corporate Structure- The Management Organization91 words
  3. 1.4: The Finance Function Within the Corporation72 words
  4. 1.5: Capital Structure367 words
  5. 1.6: Thinking Like an Economist- Abstraction642 words
  6. 1.7: Abstraction- Absurd AND Necessary318 words
  7. 1.8: Modes of Reasoning- Dialectical versus Analytic106 words
  8. 1.9: Finance Style244 words
  9. 2: Financial Statements Analysis- The Balance Sheet68 words
  10. 2.2: The Finance in the Financial Statements373 words
  11. 2.3: The Balance Sheet399 words
  12. 2.4: Sample Bookkeeping Entries200 words
  13. 2.5: Current Assets - Inventory and Accounts Receivable343 words
  14. 2.6: Financial Claims Hierarchy413 words
  15. 2.7: Interest Paid on Bonds and Dividends Paid on Stock196 words
  16. 2.8: Bankruptcy378 words
  17. 2.9: The Balance Sheet, Net Income, and the Common Shareholder180 words
  18. 2.10: Corporate Goals280 words
  19. 2.11: Words and Numbers (An Aside)179 words
  20. 2.12: Chapter 2 Review Questions247 words
  21. 3: Financial Statements Analysis- The Income Statement123 words
  22. 3.2: The Income Statement1,240 words
  23. 3.3: On Learning and Studying87 words
  24. 3.4: Financial Statements- Interpretation696 words
  25. 3.5: The Audit286 words
  26. 3.6: Perpetual Inventory Accounting291 words
  27. 3.7: Periodic Inventory Analysis- Ending Inventory and Cost of Goods Sold191 words
  28. 3.8: Units to Numbers- FIFO and LIFO334 words
  29. 3.9: Inventory Costing Calculations- A Closer Look at the COGS and Ending Inventory Computations490 words
  30. 3.10: Inventory Accounting Issues- LIFO414 words
  31. 3.11: LIFO Base Illustration301 words
  32. 3.12: Accounting for Long-term Assets- Straight-Line Depreciation (For Reporting Purposes Only)253 words
  33. 3.13: Accounting Entries for Depreciation157 words
  34. 3.14: Accelerated Depreciation Methods- Sum-of-the-Years' Digits (For reporting purposes only)218 words
  35. 3.15: Accelerated Depreciation Methods- Double/Declining Balance (For reporting purposes only)294 words
  36. 3.16: Comparative Summary of Depreciation Methods150 words
  37. 3.17: The Balance Sheet versus the Income Statement- A Summary85 words
  38. 3.18: Chapter Three- Review Questions260 words
  39. 4.2: Accounting versus Finance63 words
  40. 4.3: Earnings Management- Accrual, Real, and Expectations Management874 words
  41. 4.4: Business Ethics- Examples of Fraudulent Revenue Recognition385 words
  42. 4.5: Business Ethics- Examples of Fraudulent Expense Recognition299 words
  43. 4.6: Chapter 4- Review Questions222 words

Part II- Ratio Analysis and Forecasting Modeling

  1. 5.2: Financial Ratios and Forecasting489 words
  2. 5.3: Financial Ratios755 words
  3. 5.5: Liquidity and Liquidity Ratios1,463 words
  4. 5.6: The Income Statement versus the Balance Sheet131 words
  5. 5.7: Accounts Receivable Aging Schedule309 words
  6. 5.8: Solvency Ratios1,084 words
  7. 6.2: Profitability, Return and Asset Turnover Ratios870 words
  8. 6.3: The DuPont Model95 words
  9. 6.4: What Does the Dupont Model Show Us?180 words
  10. 6.5: Financial Ratios in Action147 words
  11. 7: Market Ratios75 words
  12. 7.2: Market Ratios1,000 words
  13. 7.3: Earnings Retention and Growth137 words
  14. 7.4: The P/BV and P/E Ratios692 words
  15. 7.5: Ratio Analysis Exercise77 words
  16. 7.6: Solution Template for Ratio Analysis Problem62 words
  17. 7.8: Adjustments to Basic Financial Ratios for Companies That Have Preferred Stock107 words
  18. 7.10: Industry Data Benchmarks139 words
  19. 7.11: Some Limitations of Financial Ratios239 words
  20. 8.1: Chapter Eight- Learning Outcomes72 words
  21. 8.2: Pro Forma Financial Analysis- The Corporate Environment394 words
  22. 8.3: Pro-Forma (Projected) Cash Flow Analysis495 words
  23. 8.4: Incrementalism354 words
  24. 8.5: Corporate Forecasting and Strategic Planning301 words
  25. 8.6: Forecasting Solution91 words
  26. 8.7: The Tax Effect of Depreciation311 words
  27. 9.1: Chapter Nine- Learning Outcomes72 words
  28. 9.2: Free Cash Flow1,731 words
  29. 9.3: Free Cash Flow Exercises708 words
  30. 9.4: External Funds Needed Formula (EFN)832 words
  31. 9.5: Internal and External Funds (Summary)242 words
  32. 9.6: The EFN Formula Explained461 words
  33. 9.8: EFN Solution873 words
  34. 9.9: Summary- The Fundamentals of Accounting and Financial Analysis213 words
  35. 9.10: Chapters Eight and Nine- Review Questions618 words

Part III- The Time Value of Money

  1. 10: The Time Value of Money- Simple Present- and Future-Values100 words
  2. 10.1: Chapter Ten- Learning Outcomes71 words
  3. 10.2: The Time Value of Money and Interest1,139 words
  4. 10.3: Interest-on-the-Interest- The Nature of Compound Interest195 words
  5. 10.4: Some More Simple TVM Problems401 words
  6. 10.5: Simple Future and Present Values (Formulas)158 words
  7. 10.8: Characteristics of the Time Value of Money- FV and PV245 words
  8. 10.9: Future and Present Value Factors (Multipliers)87 words
  9. 10.10: A Word on Compounding Frequency and Annual Equivalent Rates92 words
  10. 10.11: Interpolation251 words
  11. 10.12: Interpolation Illustrated207 words
  12. 10.13: Some TVM Practice Questions316 words
  13. 10.14: The Volatility of the Time Value of Money634 words
  14. 10.15: The First and Second Derivatives Illustrated484 words
  15. 11: The Time Value of Money- Annuities, Perpetuities, and Mortgages143 words
  16. 11.1: Chapter Eleven- Learning Outcomes73 words
  17. 11.2: Annuities153 words
  18. 11.3: The Derivation of (Ordinary) Annuity Factors123 words
  19. 11.4: The Derivation of Annuity Factors (Solution)290 words
  20. 11.5: Future and Present Annuity Values- The Nature of Their Cash Flows112 words
  21. 11.6: Future and Present Annuity Factors- Mathematical Formulas154 words
  22. 11.7: Characteristics of Annuity Factors- A Review260 words
  23. 11.8: Annuities- Practice Problems84 words
  24. 11.9: Annuities Due157 words
  25. 11.10: Annuities Due (Solutions)144 words
  26. 11.11: Adjustment from Ordinary Annuity to Annuity Due267 words
  27. 11.12: Uneven Cash Flows90 words
  28. 11.13: Uneven Cash Flows (Solutions)179 words
  29. 11.16: Uneven Cash Flows- Another Self-Test Practice Problem64 words
  30. 11.18: Perpetuities- No-Growth Perpetuities364 words
  31. 11.19: The “Law of Limits” and Perpetuities344 words
  32. 11.20: Growth Perpetuities422 words
  33. 11.21: Fractional Time Periods288 words
  34. 11.22: Loans- The Conventional Mortgage291 words
  35. 11.23: A Few Thoughts about Mortgages403 words
  36. 11.24: Summary Comparison of 15- and 30-Year Mortgages414 words
  37. 11.25: Personal Financial Planning Problem222 words
  38. 11.26: Summary- The Time Value of Money223 words
  39. 11.27: Chapters 10 - 11- Review Questions404 words

Part IV Interest Rates Valuation and Return

  1. 12.1: Chapter Twelve- Learning Outcomes69 words
  2. 12.2: Security Return- The Holding Pattern Return (Raw Calculation)267 words
  3. 12.3: Valuation Premise157 words
  4. 12.4: Fixed Income Securities- Bond Components and Valuation Formula418 words
  5. 12.5: Fixed Income Securities- Dollar Price and Yield-to-Maturity328 words
  6. 12.6: Bond Dollar Prices- Discount, Par, and Premium442 words
  7. 12.7: The True Price of a Bond183 words
  8. 13: Interest Rates71 words
  9. 13.1: Chapter Thirteen- Learning Outcomes101 words
  10. 13.2: Interest Rates- Returns to Investors; Cost to the Corporation698 words
  11. 13.4: Fixed Income Risks269 words
  12. 13.5: Interest Rate and Reinvestment Rate Risks198 words
  13. 13.6: Credit Ratings1,178 words
  14. 13.7: The Yield Curve449 words
  15. 13.8: The Term Structure of Interest Rates- Four Yield Curve Theories1,396 words
  16. 13.9: Credit Spreads466 words
  17. 13.10: High Yield Securities- Junk Bonds and Other Speculative Securities395 words
  18. 13.11: Summary- Interest Rates, the Corporation, and Financial Markets186 words
  19. 14: Equity Valuation and Return Measurement114 words
  20. 14.2: The Philosophy of Equity Valuation272 words
  21. 14.3: Equity Valuation176 words
  22. 14.4: The Dividend Discount Model (DDM)- Fixed Dividend or No- Growth Version243 words
  23. 14.5: The Dividend Discount Model (DDM)- Constant Growth Version315 words
  24. 14.8: What About Quarterly Dividends?216 words
  25. 14.9: Components of the Dividend Discount Model172 words
  26. 14.10: A Closer Look at Dividend Growth278 words
  27. 14.12: Value Prediction Problem92 words
  28. 14.13: A Qualitative Look at The Discount Rate402 words
  29. 14.14: Business Ethics - The Small Investor's Experience of Insider Trading436 words
  30. 14.15: Capital Gains157 words
  31. 14.16: Portfolio Return (Weighted Averages)389 words
  32. 14.17: The Geometric Average Return- Multi-year Returns282 words
  33. 14.18: Chapters 12-14- Review Questions848 words

Introduction to Financial Analysis by LibreTexts (Kenneth S. Bigel, Touro University), used under the CC BY 4.0 licence. The original course includes videos, quizzes and a final exam that are not reproduced here.