II.1 Financial Statements and Ratio Analysis

Financial Statements and Ratio Analysis


  • To learn how to run sensitivity and scenario analysis, and their use in model design and decision support.
  • To master the most important features and operations in Excel, and to use these efficiently.
  • To understand the key principles of visual communication and presentation.


  • Overview. This course covers core aspects of modelling and analysis of financial statements. It starts with an overview of the meaning of financial statements, including examples of how these are affected by transactions in business operations. It then covers ratio analysis of financial statements and the application to analysing individual companies as well as industries and portfolios of investments. It then discusses the modelling (forecasting) of financial statements using a step-by-step methodology. It discusses how more detail and sophistication can be added to each step, as necessary in specific contexts. In the final section, it introduces some key aspects of related topics, such as merger modelling and project finance models.
  • Practical Work and Exercises. Readers are expected to build simple examples for themselves as they follow the text. The course also contains downloadable data sets or simple models that allow a reader to do this practical work without having to enter large sets of data or repeat previous steps.


  • Financial statements introduction. Meaning and transactions · Financial statement analysis
  • Ratio analysis. Key categories and ratios· Dupont analysis · Multi-variable Dupont analysis · Piotroski F-score.
  • Portfolio analysis.· Variance analysis and scenario analysis· Kaplan-Schweser decomposition.
  • Modelling integrated financial statements · Objectives · Key steps and issues to consider · Differences with historical analysis · Step-by-step methodology · Generalising the models to include specific features.
  • Tips and tricks. Balancing the balance sheet · Circular references · Consistency checking · Error elimination.
  • Introduction to related applications: Some key aspects of merger modelling and project finance.