This lesson examines the tools and techniques used for financial analysis and financial planning, including ratio analysis and cash flow analysis.

7.1 Financial Statements

The House of Training syllabus covers Financial Statements, Ratio analysis, and Cash Flow Statements as core components of financial analysis . Financial statements provide the essential data for assessing an organisation’s financial health, performance, and cash-generating ability.

7.2 Ratio Analysis

Ratio analysis is a fundamental technique for interpreting financial statements. Key categories include:

  • Profitability Ratios: Return on Equity (ROE), Return on Assets (ROA), Net Interest Margin (NIM).

  • Liquidity Ratios: Current ratio, quick ratio.

  • Solvency Ratios: Debt-to-Equity ratio, interest coverage ratio.

  • Efficiency Ratios: Asset turnover, inventory turnover.

7.3 Cash Flow Analysis

Cash flow analysis is central to treasury management. The ACT DipTM syllabus covers forecasting need for other funds, forecasting return on investments, and monitoring cash flow . Analysing cash flow from operations is a core skill for assessing a company’s ability to generate cash and service its debt.

7.4 Financial Planning

Financial planning involves forecasting the organisation’s future financial position and performance. This includes:

  • Cash Flow Forecasting: Identifying funding gaps and investment opportunities.

  • Funding Needs Analysis: Determining the amount and timing of required funding.

  • Financial Modelling: Building models to assess the impact of different scenarios on financial performance.

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