D366 Financial Statement Analysis Course
Study Guide (1, 2 This is a study guide of all
the information you need to know to pass the
OA) 2025 Western Governors University
Course Overview
Financial Statement Analysis guides us through the concepts and
provides tools for financial analysts to evaluate the financial elements of
the firm as well as external factors to ultimately arrive at a valuation.
Students will learn a process to analyze data and the concepts where
you can determine the quality of that data. This process provides a
structure where ratios and company results are not looked at
individually but as a whole in determining the worth of an enterprise,
leading to an analysis-based valuation of the firm.
The course includes many learning aids. Look for comprehensive
practice assessments that will highlight areas of strength and details
for future study. Using the flashcards and the searchable glossary will
help put the language of business at your fingertips for better job
performance. You will be able to make notes and highlight important
text passages to increase your fluency. The mix of text, video, and
audio allows you the flexibility to study in sections or work on the
material in convenient components that will draw you to a successful
objective assessment.
The primary topics include discussions about the concepts of financial
statement analysis, valuation of risks and solvency, the importance
of cashflow, earnings, residual income, and assessing quality within
financial
statements and financial ratios. Relating the course material to
organizations you know will help with your understanding.
Communicating this knowledge to decision-makers
,Section 1 Introduction: Explains Evaluating Quality
Financial statements play an important role in the valuation of an organization. An individual
performing a financial statement analysis must have the knowledge and experience to know
what to look for. You will learn about the steps and tools that can be used to perform an
analysis.
This section consists of eight lessons:
• Lesson 1 describes the six-step analytical framework that is used to perform
an analysis of financial statements.
• Lesson 2 focuses on the tools that are used to assess economic
characteristics that drive competition.
• Lesson 3 focuses on identifying a firm's strategies to stay competitive.
• Lesson 4 provides an overview of forecasting financial statements.
• Lesson 5 discusses the importance of quality accounting information.
• Lesson 6 describes earnings management and the conditions under which
managers might engage in it.
• Lesson 7 focuses on different types of liabilities, how judgment can
affect liability recognition and measurement, and how off-balance
financials can affect quality.
• Lesson 8 describes the likelihood of earnings manipulation.
, Lesson 1 Summary
This lesson covered the key role that financial statements play in the valuation of an
organization. The key concepts in this lesson include the following:
• Financial statement analysis can be viewed in three parts: economics,
strategy, and financial statements.
• There are six interrelated steps in financial statement analysis:
1. identify economic characteristics and competitive dynamics in the industry
2. identify company strategies
3. assess the quality of the financial statements
4. analyze profitability, growth, and risk
5. project future financial performance
6. value the firm
• An accounting system maps an organization's transactions.
• Analysts and investors analyze financial statements to get a better
understanding of an organization's profitability, growth, and risk.
• Accounting fundamentals are mapped into future earnings and cash flows.
This lesson covered financial statement analysis, the building blocks used for analysis, and
the six interrelated sequential steps in financial statement analysis. The next lesson will
cover the tools that are used to assess the economic characteristics that drive
competition.
To prepare for the portion of the objective assessment, ask yourself these questions:
1. Can I explain resources and techniques used to analyze financial statements
and value enterprises?
2. Can I explain how to evaluate financial information to determine whether it
is reliable, accurate, and appropriate for its intended purpose?
Lesson 1 Financial Structure
Financial statements play an important role when performing an analysis or valuation of an
organization. Individuals performing an analysis must have knowledge of generally accepted
accounting principles (GAAP) in order to measure and report financial data. A financial
statement analysis can be performed using many tools and techniques.
Lesson 1.1: Six-Step Analytical Framework for Financial Analysis
What is involved in analysis and what are some important questions that may be answered while
performing an analysis?
An organization needs to be able to identify the economic characteristics of other
organizations in the same industry, perform an analysis to determine its strategy, and
evaluate the financial statements accurately to get an understanding of its financial status.
Building blocks include economics, strategy, financial statements, and the six interrelated
sequential steps in financial statement analysis: identify characteristics, identify strategies,
assess financial statement quality, analyze profitability, project future financial statements,
and value the organization. This content reviews the building blocks and describes the six-
step analysis framework in detail.
, Effective financial analysis has three main components: identify the economic characteristics
of the organization's industry, describe strategies for the organization to differentiate itself,
and evaluate the financial statements. One method used is the six interrelated steps. These
steps provide an approach to financial statement analysis for valuation and other financial
decisions. This reading covers the six-step analysis and valuation framework that is helpful in
performing an accurate analysis. Consider each of the six steps as you complete the following
reading.
Read pages 1–7 in Financial Reporting, Financial Statement Analysis, and Valuation.
This lesson covered financial statement analysis, the building blocks used for analysis, and the
six interrelated sequential steps in financial statement analysis. The next lesson will cover the
tools that are used to assess the economic characteristics that drive competition.
Take Lesson 1 Assessment (e.g., Quiz, Test, Practice,
Performance)
Lesson 2
All organizations strive to stay competitive in their own industry. In order to stay competitive,
organizations may use tools to help understand the amount of competition and their own
profitability. Some of the tools include Porter's Five Forces model, value chain analysis, and
the economic attributes framework. You will learn about these various tools and how they are
used to establish strategies.
Consider the following learning objective as you move through the lesson:
• Apply tools that identify specific strategies for achieving and maintaining a
competitive advantage.
Lesson 2.1: Economic Characteristics That Drive
Competition
Porter's Five Forces model is one tool used to measure competition and profitability. The five
forces are competition in the industry, potential of new entrants, power of suppliers, power of
customers, and threat of substitutes. Value chain analysis is another tool that can help an
organization identify areas that need improvement. The economic attributes framework is
useful when studying the economic attributes of an industry. This lesson discusses these
tools and their uses.
Many tools are used to assess the characteristics that drive competition. The three most
common tools are Porter's Five Forces model, value chain analysis, and the economic
attributes framework. These tools help identify an organization's strategy. Porter's Five
Forces looks at supplier power, threat of entry, existing rivalry, threat of substitutes, and
buyer power. Value chain analysis starts the sequence of events that are involved in the
creation, manufacturing, and distribution of products and services. The economic attributes
framework is used to study the economic attributes of the industry. Consider how each of
these tools can each be used to assess industry economic conditions as you complete the
following reading.
Read pages 8–16 in Financial Reporting, Financial Statement Analysis, and Valuation.
This lesson explored various tools that may be used to identify strategies for keeping a
competitive advantage. Key concepts in this lesson include the following:
• Economic characteristics and competitive dynamics in an industry play a
significant role in strategy influence.
• Porter's Five Forces model suggests that five forces influence the level of
competition and profitability. These levels include supplier power, the threat
of entry, existing rivalry, the threat of substitutes, and buyer power.
• Value chain analysis is another tool that is used in financial statement
Study Guide (1, 2 This is a study guide of all
the information you need to know to pass the
OA) 2025 Western Governors University
Course Overview
Financial Statement Analysis guides us through the concepts and
provides tools for financial analysts to evaluate the financial elements of
the firm as well as external factors to ultimately arrive at a valuation.
Students will learn a process to analyze data and the concepts where
you can determine the quality of that data. This process provides a
structure where ratios and company results are not looked at
individually but as a whole in determining the worth of an enterprise,
leading to an analysis-based valuation of the firm.
The course includes many learning aids. Look for comprehensive
practice assessments that will highlight areas of strength and details
for future study. Using the flashcards and the searchable glossary will
help put the language of business at your fingertips for better job
performance. You will be able to make notes and highlight important
text passages to increase your fluency. The mix of text, video, and
audio allows you the flexibility to study in sections or work on the
material in convenient components that will draw you to a successful
objective assessment.
The primary topics include discussions about the concepts of financial
statement analysis, valuation of risks and solvency, the importance
of cashflow, earnings, residual income, and assessing quality within
financial
statements and financial ratios. Relating the course material to
organizations you know will help with your understanding.
Communicating this knowledge to decision-makers
,Section 1 Introduction: Explains Evaluating Quality
Financial statements play an important role in the valuation of an organization. An individual
performing a financial statement analysis must have the knowledge and experience to know
what to look for. You will learn about the steps and tools that can be used to perform an
analysis.
This section consists of eight lessons:
• Lesson 1 describes the six-step analytical framework that is used to perform
an analysis of financial statements.
• Lesson 2 focuses on the tools that are used to assess economic
characteristics that drive competition.
• Lesson 3 focuses on identifying a firm's strategies to stay competitive.
• Lesson 4 provides an overview of forecasting financial statements.
• Lesson 5 discusses the importance of quality accounting information.
• Lesson 6 describes earnings management and the conditions under which
managers might engage in it.
• Lesson 7 focuses on different types of liabilities, how judgment can
affect liability recognition and measurement, and how off-balance
financials can affect quality.
• Lesson 8 describes the likelihood of earnings manipulation.
, Lesson 1 Summary
This lesson covered the key role that financial statements play in the valuation of an
organization. The key concepts in this lesson include the following:
• Financial statement analysis can be viewed in three parts: economics,
strategy, and financial statements.
• There are six interrelated steps in financial statement analysis:
1. identify economic characteristics and competitive dynamics in the industry
2. identify company strategies
3. assess the quality of the financial statements
4. analyze profitability, growth, and risk
5. project future financial performance
6. value the firm
• An accounting system maps an organization's transactions.
• Analysts and investors analyze financial statements to get a better
understanding of an organization's profitability, growth, and risk.
• Accounting fundamentals are mapped into future earnings and cash flows.
This lesson covered financial statement analysis, the building blocks used for analysis, and
the six interrelated sequential steps in financial statement analysis. The next lesson will
cover the tools that are used to assess the economic characteristics that drive
competition.
To prepare for the portion of the objective assessment, ask yourself these questions:
1. Can I explain resources and techniques used to analyze financial statements
and value enterprises?
2. Can I explain how to evaluate financial information to determine whether it
is reliable, accurate, and appropriate for its intended purpose?
Lesson 1 Financial Structure
Financial statements play an important role when performing an analysis or valuation of an
organization. Individuals performing an analysis must have knowledge of generally accepted
accounting principles (GAAP) in order to measure and report financial data. A financial
statement analysis can be performed using many tools and techniques.
Lesson 1.1: Six-Step Analytical Framework for Financial Analysis
What is involved in analysis and what are some important questions that may be answered while
performing an analysis?
An organization needs to be able to identify the economic characteristics of other
organizations in the same industry, perform an analysis to determine its strategy, and
evaluate the financial statements accurately to get an understanding of its financial status.
Building blocks include economics, strategy, financial statements, and the six interrelated
sequential steps in financial statement analysis: identify characteristics, identify strategies,
assess financial statement quality, analyze profitability, project future financial statements,
and value the organization. This content reviews the building blocks and describes the six-
step analysis framework in detail.
, Effective financial analysis has three main components: identify the economic characteristics
of the organization's industry, describe strategies for the organization to differentiate itself,
and evaluate the financial statements. One method used is the six interrelated steps. These
steps provide an approach to financial statement analysis for valuation and other financial
decisions. This reading covers the six-step analysis and valuation framework that is helpful in
performing an accurate analysis. Consider each of the six steps as you complete the following
reading.
Read pages 1–7 in Financial Reporting, Financial Statement Analysis, and Valuation.
This lesson covered financial statement analysis, the building blocks used for analysis, and the
six interrelated sequential steps in financial statement analysis. The next lesson will cover the
tools that are used to assess the economic characteristics that drive competition.
Take Lesson 1 Assessment (e.g., Quiz, Test, Practice,
Performance)
Lesson 2
All organizations strive to stay competitive in their own industry. In order to stay competitive,
organizations may use tools to help understand the amount of competition and their own
profitability. Some of the tools include Porter's Five Forces model, value chain analysis, and
the economic attributes framework. You will learn about these various tools and how they are
used to establish strategies.
Consider the following learning objective as you move through the lesson:
• Apply tools that identify specific strategies for achieving and maintaining a
competitive advantage.
Lesson 2.1: Economic Characteristics That Drive
Competition
Porter's Five Forces model is one tool used to measure competition and profitability. The five
forces are competition in the industry, potential of new entrants, power of suppliers, power of
customers, and threat of substitutes. Value chain analysis is another tool that can help an
organization identify areas that need improvement. The economic attributes framework is
useful when studying the economic attributes of an industry. This lesson discusses these
tools and their uses.
Many tools are used to assess the characteristics that drive competition. The three most
common tools are Porter's Five Forces model, value chain analysis, and the economic
attributes framework. These tools help identify an organization's strategy. Porter's Five
Forces looks at supplier power, threat of entry, existing rivalry, threat of substitutes, and
buyer power. Value chain analysis starts the sequence of events that are involved in the
creation, manufacturing, and distribution of products and services. The economic attributes
framework is used to study the economic attributes of the industry. Consider how each of
these tools can each be used to assess industry economic conditions as you complete the
following reading.
Read pages 8–16 in Financial Reporting, Financial Statement Analysis, and Valuation.
This lesson explored various tools that may be used to identify strategies for keeping a
competitive advantage. Key concepts in this lesson include the following:
• Economic characteristics and competitive dynamics in an industry play a
significant role in strategy influence.
• Porter's Five Forces model suggests that five forces influence the level of
competition and profitability. These levels include supplier power, the threat
of entry, existing rivalry, the threat of substitutes, and buyer power.
• Value chain analysis is another tool that is used in financial statement
