I have to analyze financial statements for a company, say Oracle, for the last 5 years including revenue, net profit, employee count and other significant details released in quarterly results? How do I do it?
check the ratios and trends and identify the drivers causing the change in numbers
Trends as in??
Also, 5 years and quarterly results so repeat the process 20 times???
nah you can just focus on the per year basis then look into the quarter for more detailed analysis of a particular year
trrends as in growth year on year whether revenue, profit, working capital etc
And, what about employee count?
How are u a level 3 candidate and asking this question…
it’s because you can pass the cfa exams without really studying all of the subjects and i think its pretty
you have to relate it to other accounts in the financial statements like salaries, pension assets/liabilities, production (inventory), or whatever account employee count is related to in the financial statements.
Because CFA doesn’t teach you real world, practical stuff
OMG
You are being sarcastic?
I am surprised that you’re a level 3 candidate is asking this question…That said, assuming you’ve read the 10K and 10Qs and accompanying transcripts, you can start with DuPont analysis to get a sense of return drivers. I’d look at y/y details by quarter. I don’t know the details of Oracle, but you want to break down the revenue into the key drivers. Look at changes in FCF and understand drivers and variances (earnings, capex, NWC. etc.). If they have orders or backlog understand that. I am sure that there’s a lot I am missing…You’re asking such a general question.
Your questions Yeolmae is actually covered in the Curriculum. The first question should be what type of analysis do you need? Because investment analysis is not the same as credit analysis. Let alone if you are doing a mere get-to-know-the-buyer analysis and gauge its trade finance potential. I even remember the types of problems in which you had a company that was doing something like airplanes, automobiles, parts and something else.
It may sound silly to you guys but I’ve never done it. I understand I need to analyse income statement, balance sheet, cash flow statement. I just don’t know the details I need to study or how I should go on about it? Also, I copy pasted the exact thing which was asked.
Anyway I tried to attempt like this. Please give me your suggestions.
https://drive.google.com/file/d/1soRq0oBp4IzFZK9rp8eA9ZHe98tE-s8B/view?usp=sharing
You’ve organized the data but underwriting/ ACTUAL financial analysis requires your…well…analysis…you have to give a recommendation…I can teach you how to underwrite and provide recommendations for 150/Hr.
Maybe I only saw part of your worksheet, but in my opinion, you must understand the profitability and growth of the segments. Looking at consolidated revenues is nice, but it’s the dynamics in the segments that sum to the consolidated that matter. Also, I like quarterly analysis. If you don’t have access to a sellside model, input the quarterly data yourself and make notes/adjustments for non-recurring items.
Underwriting and fin analysis is completely separate
you can start top down or bottom up: understand your market, understand the industry and then understanding your company…you can ratio the life out of something and perform DuPont analysis but what does it mean? Put a story together…14%ROE maybe good for one industry and not another…even companies in the same industry.
Think of it as a puzzle. There are different drivers for each company so reading through management discussions to see how their strategies change is important as the other stuff. Do this for several companies in an industry and this will formulate your recommendation; do this for the market and you can make industry recommendation.
Once you understand a company it’s like ordering your fav pepperoni pizza, you know the price you pay, the quantity you will get and the overall value of what you’re getting. If you wanted me to buy that pizza you will sell the story to me: the little Italian shop around the corner, family owned, makes their own pepperoni, sources their cheese from a small country town in Tuscany, has been around for 50 years, provides free bread, only five dollars…whatever. That is what you are doing…
financial analysis is part of the underwriting process (at least it should be) but yes i agree.
Well said rsparks