Accounting and Company Analysis
Dan Pickett

Accounting and Company Analysis

Training session - March 10

As mentioned at our last meeting, we are pivoting to offer more basic training in accounting and company analysis in the next training session. On March 10th we’ll review the accounting concepts and company analysis techniques described in the attached presentations and reading described below. If you review the material in advance of our meeting you will get much more out of the session. The more questions the better. We also created this signup sheet for those interested in participating in the Associate Analyst Pitch Day. We will discuss this at the March 10th session.

CMC Training Session 1 - Accounting 101.Spring 2019.pdf contains the slides we used in the 1st training session last semester. After some introductory comments, we dive into accounting with the goal to make members without formal accounting training familiar with terms and measures we use as analysts to evaluate company performance. The first important concept we discuss (on slide 12) is accrual accounting which differs from cash accounting. Generally Accepted Accounting Principles (GAAP) require companies report their results according to rules that record revenue when earned and expenses in the same period as the revenue to which they relate.

We then discuss the three main financial statements – the balance sheet, the income statement, and the statement of cash flows. The attached reading, The Language of Investing.pdf, similarly reviews the three statements that together describe how companies are performing financially.

The slides also contain references to the location in Factset where you can find the financial statements (e.g. slides 13 and 26).

In CMC Training Session 2 - Company analysis.Spring 2019.pdf we use our accounting to start evaluating companies. There are additional references to useful Factset reports (e.g. slide 7). After discussing the key elements of a pitch (slide 8) and the process an analyst follows when researching a company (slide 9), we discuss different kinds of businesses and relate that to the growth and profitability reflected in company financial statements. We also discuss the competitive nature of industries and relationship between industry competition, financial performance, and stock valuation. Information sources useful for that analysis (slide 6) and useful Factset reports (slide 21) are highlighted.

If you are interested in learning more before or after the session, there are additional readings here.

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