Financial analysis is an introductory manual whose primary scope is to define, analyze and interpret the fundamental tools that allow a “fruitful” financial analysis. The authors want to walk students and/or practitioners through the usage and interpretation of tools that are actively and fundamentally part of a firm’s decision- making process. The authors’ scope is to allow readers to comprehend how these tools are created, to understand their utilization with the use of simple but realistic examples, and ultimately to realize the important, thus challenging, interaction of financial making decisions with all other firm’s decisions (i.e. marketing, production, personnel, investment, divestment, etc.). The manual is divided into three parts and each part into chapters. To build the different tools and allow a comprehensive understanding of each of them, the manual follows a systematic approach following a time-based sequence analysis. The first part will focus on the introduction to the world of corporate finance and financial analysis, on balance sheet and income statement reclassification and on ratio analysis. This part will focus on the “starting tools” of financial analysis; the time considered will be past and present and the type of analysis called “static”. The second part will be all concentrated on the cash flow statement, the fundamental and most widely used tool in financial analysis. The time considerate will be the present (immediate past) and future (short), and the analysis called “dynamic”. The third part will concentrate on planning and forecasting tools such as the cash budget, the pro-forma balance sheet, pro-forma income statement and commercial working capital valuations; the time considered will be the future (short, medium and long) and the analysis called “prospective”. The manual is the result of almost 30 years of teaching and consulting in the field of financial analysis. The reader will have to clearly remember and adhere to the following points: 1. Financial analysis is a fundamental part of corporate finance and deserves time, concentration but mostly an attentive financial acumen. It seems “easy”; if done “well”, it can give rise to multiple unexpected solutions. 2. Financial analysis does not follow precise rules (as in the case of accounting) but general guidelines and models. This is the reason why it is challenging but highly resourceful if performed attentively. 3. Financial analysis takes time 4. Financial analysis is not stand alone and requires a good and deep understanding of the firm and its characteristics. 5. Financial analysis clearly and un-doubtfully shows the fundamental relationship between the firm’s operation and its related financing; financing occurs to support operations and it is linked to the risk, time and expected cash flow generated by such operations. The novelties of this manual are: 1. A step-by step approach: the authors will walk the readers through the different chapters with a progressive logic. Each chapter will present a tool that will be used as a starting point for the next one; only by the end of the manual all the single tools and different analysis will come together. The reader has to trust this process. 2. Theory and practice approach: each chapter will clearly present a specific tool with its definition, characteristics and possible alternative models; then, the tools are shown through few simple exercises and a final more challenging case. 3. An applicability to different environment and different types of firms This manual is the result of years of passion into this field and of the cooperation and support of our SDA Bocconi colleagues: Michele Calcaterra Borri, Dolly Predovic, Barbara Rovetta, Stefano Salvatori, Andrea Benocci, Maurizio Dallocchio, Antonio Salvi, Giacomo Morri, Renzo Cenciarini, Alberto dell’Acqua, Federico Pippo, Leonardo Etro, Leonella Gori. A special thanks goes to Andrea Dossi for his trust, to Mario Mazzoleni, my first mentor and to my wonderful and supporting kids.
Financial Analysis
Teti, Emanuele;
2019-01-01
Abstract
Financial analysis is an introductory manual whose primary scope is to define, analyze and interpret the fundamental tools that allow a “fruitful” financial analysis. The authors want to walk students and/or practitioners through the usage and interpretation of tools that are actively and fundamentally part of a firm’s decision- making process. The authors’ scope is to allow readers to comprehend how these tools are created, to understand their utilization with the use of simple but realistic examples, and ultimately to realize the important, thus challenging, interaction of financial making decisions with all other firm’s decisions (i.e. marketing, production, personnel, investment, divestment, etc.). The manual is divided into three parts and each part into chapters. To build the different tools and allow a comprehensive understanding of each of them, the manual follows a systematic approach following a time-based sequence analysis. The first part will focus on the introduction to the world of corporate finance and financial analysis, on balance sheet and income statement reclassification and on ratio analysis. This part will focus on the “starting tools” of financial analysis; the time considered will be past and present and the type of analysis called “static”. The second part will be all concentrated on the cash flow statement, the fundamental and most widely used tool in financial analysis. The time considerate will be the present (immediate past) and future (short), and the analysis called “dynamic”. The third part will concentrate on planning and forecasting tools such as the cash budget, the pro-forma balance sheet, pro-forma income statement and commercial working capital valuations; the time considered will be the future (short, medium and long) and the analysis called “prospective”. The manual is the result of almost 30 years of teaching and consulting in the field of financial analysis. The reader will have to clearly remember and adhere to the following points: 1. Financial analysis is a fundamental part of corporate finance and deserves time, concentration but mostly an attentive financial acumen. It seems “easy”; if done “well”, it can give rise to multiple unexpected solutions. 2. Financial analysis does not follow precise rules (as in the case of accounting) but general guidelines and models. This is the reason why it is challenging but highly resourceful if performed attentively. 3. Financial analysis takes time 4. Financial analysis is not stand alone and requires a good and deep understanding of the firm and its characteristics. 5. Financial analysis clearly and un-doubtfully shows the fundamental relationship between the firm’s operation and its related financing; financing occurs to support operations and it is linked to the risk, time and expected cash flow generated by such operations. The novelties of this manual are: 1. A step-by step approach: the authors will walk the readers through the different chapters with a progressive logic. Each chapter will present a tool that will be used as a starting point for the next one; only by the end of the manual all the single tools and different analysis will come together. The reader has to trust this process. 2. Theory and practice approach: each chapter will clearly present a specific tool with its definition, characteristics and possible alternative models; then, the tools are shown through few simple exercises and a final more challenging case. 3. An applicability to different environment and different types of firms This manual is the result of years of passion into this field and of the cooperation and support of our SDA Bocconi colleagues: Michele Calcaterra Borri, Dolly Predovic, Barbara Rovetta, Stefano Salvatori, Andrea Benocci, Maurizio Dallocchio, Antonio Salvi, Giacomo Morri, Renzo Cenciarini, Alberto dell’Acqua, Federico Pippo, Leonardo Etro, Leonella Gori. A special thanks goes to Andrea Dossi for his trust, to Mario Mazzoleni, my first mentor and to my wonderful and supporting kids.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
