FSA stands for Financial Statement Analisis, the subject that i take in this semester. It is part of Finance related subjects, which consist of Finance, Corporate Finance, Portfolio Management, Financial Risk management, and International Financial management.
Prof Terrence O’Keffee teach us in this semester, he is relatively mature lecturer who has unquestionable experience in teaching finance. Besides at UQ he also teach the same subject in Oregon University.
Now lets go to the subject:
Analyzing the financial statement is very important to whom interested in share market. The decision to buy and sell shares is mainly determined by how the analyst perform their job. Buy decision is taken when the shares is undervalued and vice versa.
The fundamental issue is related with understanding the past, predicting the future and evaluation.The way we do our analysis in based on three valuation model:
1. Free Cash flow (Cash based)
2. Free Cash flow (Accounting based)
3. Residual Income (Accounting Based)
We need to comprehend the Accounting Basic to understand the FSA concept. Thereby it is fundamental to know concept such as accounting equation, Income Statement, Asset, Balance Sheet, Cash Flow etc….
The other basic finance concepts are important as well such as present value method, time horizon of valuation, terminal value, free cash flow etc…..
Here we deal with the re-engineering the basic accounting equation in order to fit with our concept of valuation. Instead of using Net income, FSA redefines it with EBIT and EBITAT. From the accounting figure, we also derive the tax shield and ratios.
Key concept 1: Understanding the past
Past financial statement represents the book value of company finance. It reflects the past performance and the stepping stone to predict the future. Knowing that the company performs better in the past we will generate the prediction of company’s future. Understanding means know how the report works and identify the connection between elements in financial statement. We have to know that all figures in different report are basically derived from some fundamental figures in other report.
Key Concept 2: Predicting the Future
We depart our analysis by historical ratios. By this we will predict such thing that will happen in the future. We might have to think about the the growth…
Key Concept 3. Valuation
Valuation deals with the implementation of formula that we learn in to our analysis.