Financial Statement Analysis

Financial Statement Analysis in CFA Level 2 builds upon fundamental accounting concepts with advanced analytical techniques. It focuses on evaluating a company's financial health through thorough examination of balance sheets, income statements, cash flow statements, and supplementary disclosures. Key areas include: 1. Financial Reporting Quality - Assessing reliability of reported figures, identifying potential manipulations, and evaluating accounting choices that impact financial representation. 2. Income Statement Analysis - Examining revenue recognition practices, understanding persistent vs. transitory earnings, and analyzing operating margins and profitability trends. 3. Balance Sheet Analysis - Evaluating asset quality, liability structures, and equity components while scrutinizing off-balance sheet arrangements. 4. Cash Flow Analysis - Differentiating between operating, investing and financing activities, and analyzing cash generation sustainability. 5. Financial Ratios - Applying advanced ratio analysis for liquidity, solvency, profitability, and efficiency evaluations with emphasis on cross-sectional and time-series comparisons. 6. Inventory and Long-lived Assets - Assessing valuation methods and their impact on financial statements. 7. Inter-corporate Investments - Understanding equity method, consolidation principles, and foreign currency translations. 8. Multinational Operations - Analyzing financial statements with international operations, including currency translation adjustments. CFA Level 2 requires candidates to move beyond mechanical calculations to interpretation and implication analysis. It emphasizes identifying how accounting choices affect financial representations and developing analytical frameworks to compare companies across industries and geographies. This knowledge serves as foundation for equity and fixed income analysis, corporate finance applications, and portfolio management decisions - making Financial Statement Analysis a cornerstone of the CFA curriculum.

Financial Statement Analysis in CFA Level 2 builds upon fundamental accounting concepts with advanced analytical techniques. It focuses on evaluating a company's financial health through thorough exa…

Concepts covered: Employee Compensation: Post-Employment and Share-Based, Multinational Operations, Analysis of Financial Institutions, Intercorporate Investments, Integration of Financial Statement Analysis Techniques, Evaluating Quality of Financial Reports