Section 3: Financial Analysis

MOOC Summaries - Career Edge - Business and Data Analysis

Section 3: Financial Analysis

“revenues and costs … profitability … growth”
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Summaries

  • Section 3: Financial Analysis > Subsection 1: Introduction > 4.3.1.1. Introduction to Financial Analysis
  • Section 3: Financial Analysis > Subsection 3: Profitability > 4.3.3.1. Measuring Business Performance
  • Section 3: Financial Analysis > Subsection 3: Profitability > 4.3.3.5. Calculating Operating Margin
  • Financial Analysis > Subsection 3: Profitability > 4.3.3.7. Compound Annual Growth Rate (CAGR)
  • Section 3: Financial Analysis > Subsection 5: Conclusion > 4.3.5.2. Revisiting Financial Analysis
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Section 3: Financial Analysis > Subsection 1: Introduction > 4.3.1.1. Introduction to Financial Analysis

  • How does a business or organization define success? For a private company, like Apple or Nike, success is typically measured in profits and growth.
  • Companies use financial analysis to forecast business needs and to make critical decisions about resourcing that will affect their future health.
  • Once you know how to execute a few analyses, you will be ready to tackle tough financial decisions – both at work and at home.
  • You’ll gain experience conducting several essential business analyses including profitability, breakeven point, and return on investment.
  • Whether you want to take out a small business loan or see if an investment is worth your time, having an understanding of basic financial concepts will be a critical part of your analytical toolkit.

Section 3: Financial Analysis > Subsection 3: Profitability > 4.3.3.1. Measuring Business Performance

  • You have a good sense of your revenue and costs, but how is the business actually doing? How does the money coming in compare to the money being spent? Is your business growing or should you be concerned about retention and market share? All of these factors are indicative of a business’ health and impact the decisions you will make as a business owner.
  • A company’s revenue growth is indicative of a company’s trajectory and long-term profit potential.
  • Growing business through increased penetration or through new markets – including new products, geographies or customer types -will ultimately help a company achieve more profits.
  • Companies analyze business performance in the hopes of identifying ways to grow revenue and improve profitability.

Section 3: Financial Analysis > Subsection 3: Profitability > 4.3.3.5. Calculating Operating Margin

  • Operating income and margin analyses provide critical information around an organization’s profitability.
  • For public companies, you will typically find much of the company’s financials by searching for a company’s Annual Report and 10-K on their website’s Investor Relations page.
  • Step-by-step guide on calculating operating income and operating margin.

Financial Analysis > Subsection 3: Profitability > 4.3.3.7. Compound Annual Growth Rate (CAGR)

  • Growth rates are a critical measure of business’ health and trajectory.
  • Most organizational growth is not constant – often, it varies year by year.
  • CAGR enables you to get a sense of the growth “On average.” CAGR is equal to ending value divided by beginning value raised to the power of 1 divided by the number of years, all minus 1.
  • Step-by-step guide on calculating compound annual growth rate of a company’s revenue from 2012 to 2016.

Section 3: Financial Analysis > Subsection 5: Conclusion > 4.3.5.2. Revisiting Financial Analysis

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  • App-based final assessment on your knowledge and basic terminology about an organization’s financial performance.

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