Financial and operational managers use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can be formed. Shareholders may use ratio analysis to measure your company's results against other organizations or make judgments concerning management effectiveness and mission impact.
Important ratio 'groups' that assist in analyzing a business and its viability are efficiency and performance ratios. Performance ratios measure the function of core operations for a company. These ratios reveal information about how efficiently resources are used to generate sales and cash, among other things. Efficiency ratios are used to analyze how well a company uses its assets and liabilities internally.
It is important to understand the calculation requirements of each ratio but equally important is to understand what the results represent in regard to performance and efficiency. This course will cover both concepts.
Ratio analysis is a useful tool that will improve understanding of financial results over time. It provides key indicators of organizational performance. This course focuses on specific efficiency and performance ratios and their use.
Publication Date: November 2022
Designed For
Financial and accounting analysts, internal auditors, compliance analysts, investor analysts and anyone interested in having a better comprehension of a company’s performance.
Topics Covered
- Explore the types and purpose of efficiency ratios
- Sales and Inventory
- AR turnover
- Asset turnover
- Inventory turnover
Explore the purpose of performance ratiosIdentify various performance ratios and how to analyze the resultsDays sales outstandingCash conversion cycleDays payable outstandingDays inventory outstandingExplore profitability ratiosNP profit marginOperating profit marginEBITDA margin
Learning Objectives
- Identify the mathematics behind ratios and the importance of understanding the concepts for proper analysis
- Recognize the types and purpose of efficiency ratios
- Describe the purpose of performance ratios
- Identify various performance ratios and how to analyze the results
- Identify the type of ratio that is used to analyze how well a company uses its assets and liabilities internally
- Identify the type of ratio an AR turnover and inventory turnover are examples of
- Identify the appropriate formula for calculating asset turnover
- Identify the type of margin ratio that is useful because it strips-out costs which are not directly related to how efficiently the business generates cash
- Identify the component not needed for purposes of calculating a company's cash conversion cycle
Level
Basic
Instructional Method
Self-Study
NASBA Field of Study
Auditing (2 hours)
Program Prerequisites
None
Advance Preparation
None
Instructor
Lynn Fountain
Lynn Fountain has over 38 years of experience spanning public accounting, corporate accounting and consulting. 20 years of her experience has been working in the areas of internal and external auditing and risk management. She is a subject matter expert in multiple fields including internal audit, ethics, fraud evaluations, Sarbanes-Oxley, enterprise risk management, governance, financial management and compliance. Lynn has held two Chief Audit Executive (CAE) positions for international companies. In one of her roles as CAE, she assisted in the investigation of a multi-million-dollar fraud scheme perpetrated by a vendor that spanned 7 years and implicated 20 employees. The fraud was formally investigation by the FBI and resulted in 5 indictments estimating a $13M fraud loss.
Ms. Fountain is currently engaged in her own consulting and training practice. She is a highly sought-after trainer and international speaker. In addition, Ms. Fountain has assisted numerous companies with enterprise risk management frameworks, internal audit processes and financial accounting. She also serves as a discussion leader for the AICPA for numerous classes finance, accounting and risk management topics.
Ms. Fountain is the author of three separate technical books. Her first book released in 2015 by the Institute of Internal Auditors Foundation is entitled “Raise the Red Flag – The Internal Auditors Guide to Fraud Evaluations”. Her second book “Leading the Internal Audit Function” was released in October 2015 by Taylor & Francis Publications. This book serves as the initial launch for a series of leading practice internal audit and information technology publications. Her third book “Ethics and the Internal Auditor’s Dilemma” was released in December 2016.
Ms. Fountain obtained her BSBA from Pittsburg State University and her MBA from Washburn University in Kansas. She has her CPA, CGMA, CRMA credentials.