Introduction to Financial Analysis - The "Why?"

Overview

Class Central Tips

In this course, you will learn the foundations important to developing and implementing a financially analytic mindset. This course introduces the foundations of financial analysis, beginning with the first question: what is financial analysis? You will learn about the importance of adopting and applying a financial perspective. You will learn about accounting and finance principles and fundamentals. Accounting principles allow for the creation of consistent and reliable financial information. Key fundamentals of finance facilitate the use of a financially analytic mindset in different settings, including corporate and organizational, investment opportunities, and entrepreneurial settings. Ultimately, from this course, you will take away a strong foundational understanding of financial analysis, on which you can build further knowledge and skills related to financial analysis of organizations and organizational decisions and scenarios.

Syllabus

Course Introduction and Module 1: What is Financial Analysis?

In this module, you will be introduced to the agency problem, and how organizations mitigate it. You will also learn the goals of financial management, and be be introduced to three basic forms to organize a business based on the nature of the business and its financing needs. Examining the goal of financial business helps us to develop a concrete framework to evaluate a manager’s financial decisions. The corporation organization form is widespread because it can solve problems facing big business, but it also incurs the agency cost.

Module 2: A Financial Perspective - What and Why?

In this module, you will first learn about accounting and why it - as well as financial statements as a key component of accounting - is important to all types of organizations. You will then engage in an overview of key aspects of financial statements, including how they reflect an organization's position and performance. Finally, you will be introduced to accounting for transactions, which comprise the "building blocks" of financial statements. By the end of this module, you will have been introduced to key dimensions of accounting, and thus have created a foundation for a deeper dive into these concepts (presented in other related modules and courses).

Module 3: Finance Fundamentals

In this module, you will be introduced to the basic concepts about the time value of money: the present value, the future value, and the net present value. There are widespread applications of time value of money in our daily life and business valuation. Some examples include mortgage plan selection, pension plan choice, and investment decisions. And, of course, the time value of money affects organizational valuation and decision-making as well. You will then turn to different forms of financing, including debts (e.g., bonds) and equity (e.g., stocks). How a company finances its operations, strategy, and long-term investment has major implications for its valuation, as well as its success.