The Interpretation of Financial Statements

11 Credits: Accounting


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The Interpretation of Financial Statements

Course Level
CPE Credits

11 Credits: Accounting

Course Description

When someone asks for information about a business, they are likely to receive its financial statements. These statements quantify the results, financial position, and cash flows of a business. However, these documents only provide information at quite a high level, and so may obscure more than they reveal. The Interpretation of Financial Statements is designed to cut through this obscurity, describing a number of tools for dissecting financial statements, as well as a wealth of additional insights into the reasons for the presence of or changes in certain numbers.

The bulk of the course covers three topics, which are the interpretation of the balance sheet, income statement, and cash flows. There is also a detailed explanation of the contents and interpretation of additional public company information. You’ll gain valuable insight about the accounts that make up the various line items in a financial statement, the use of applicable analysis tools, specific operational and financial issues that may be causing certain results to appear in the financial statements, and much more.

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Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Identify how the accrual basis of accounting concept functions.
  • Identify how the accounting equation concept works.

Chapter 2

  • Cite the business situations indicated by different cash levels and cash designations.

Chapter 3

  • Cite the uses of the contribution margin and days sales outstanding measurements, as well as the situations in which they can be misleading.

Chapter 4

  • Cite the industry situations in which an investment in inventory is considered to be critical.
  • Identify the reasons for different inventory turnover levels.

Chapter 5

  • Cite the calculations used for the different depreciation methods.
  • Identify the effects on profitability of the various depreciation rules.

Chapter 6

  • State the contents of the prepaid expenses line item.
  • Cite the situations that can change the balance of the prepaid expenses line item.
  • Identify the circumstances under which goodwill is considered to be impaired.

Chapter 7

  • Identify the business conditions that can alter the balances in the current liabilities line items.

Chapter 8

  • Identify the circumstances causing a change in debt classification.
  • Identify the situations in which the debt level can be considered minor.

Chapter 9

  • Cite the effects of debt-to-equity conversions on measurements.
  • Identify the contents of the book value and tangible book value measurements.

Chapter 10

  • Identify the situations that cause reliable sales.
  • Identify the types of investors attracted to rapid sales growth.

Chapter 11

  • Identify the contents of the cost of goods sold.
  • Cite the methods used to improve the gross margin percentage.

Chapter 12

  • Define the contents of operating expenses.
  • Identify the business situations that can cause these line items to change.

Chapter 13

  • Identify the situations in which net operating losses may be generated.
  • Name the techniques used to improve the net profit margin and earnings per share.

Chapter 14

  • Cite the contents of the different classifications within the statement of cash flows.

Chapter 15

  • Identify the types of audit examinations, the uses to which the margin of safety can be put, and the contents of the dividend analysis formulas.

Chapter 16

  • Cite the required contents of the different sections of the Form 10-K.
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Course Specifics

Course ID
Revision Date
May 22, 2023

There are no prerequisites.

Advanced Preparation


Number of Pages

Compliance Information

NASBA Provider Number: 103220

CMA Notice: Western CPE makes every attempt to maintain our CMA CPE library, to ensure a course meets your continuing education requirements please visit Insitute of Management Accountants (IMA)

CFP Notice: Not all courses that qualify for CFP® credit are registered by Western CPE. If a course does not have a CFP registration number in the compliance section, the continuing education will need to be individually reported with the CFP Board. For more information on the reporting process, required documentation, processing fee, etc., contact the CFP Board. CFP Professionals must take each course in it’s entirety, the CFP Board DOES NOT accept partial credits for courses.

Meet The Experts

Steven M. Bragg Headshot

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 250 business books and courses. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast. Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and …

Steven M. Bragg, CPA Read More »