Dean Kaplan

As specialists in collecting large commercial claims, The Kaplan Group understands that financial statement analysis is often critical to our understanding of a company’s ability to pay and instrumental in structuring a successful resolution.

But the ability to analyze financial statements is even more important during the credit evaluation and granting process, and in managing your own business. We recently published a series of five free videos explaining financial statements and how to analyze them. A free downloadable transcript is also available along with an Excel spreadsheet model that automatically calculates key ratios.

Over the years, I have been invited to numerous seminars sponsored by various organizations such as Riemer Reporting Service, NACM, and D&B, to explain financial statements and how to analyze them. We took the material from those seminars and created these videos so the information would be available to a wider audience. The five videos are:

  1. Understanding the Income Statement
  2. Income Statement Analysis
  3. Understanding the Balance Sheet
  4. Balance Sheet Analysis
  5. Cash Flow Statement Explanation and Analysis

Our commercial collection agency clients are evaluating the credit-worthiness of customers and potential customers on a daily basis. Payment history and references are key components in this process. Credit reports provide valuable information. But financial statements can provide insights into understanding the business in far greater detail. The Excel model we have created makes it easy to get these insights in a matter of a few minutes and the data can be entered by an entry level analyst.

For business owners and managers, understanding the performance of your own company is key to planning and improving performance. It helps you understand areas of strength and weakness. It also allows you to understand what changes would have the greatest impact on profitability and liquidity.

The first video explains the income statement. When you look in an annual report for a publicly traded company, the first financial statement you see is the balance sheet. But, as an executive or business owner, I’m working to create profit and value. So personally, I like to explore the income statement first.

The income statement is the company’s statement of profitability for the specified period. A quick look gives us an idea of how large the company is, reports the net income, and gives a general sense of the relationship of profits to sales. However, just because a company is profitable does not mean it has positive cash flow or is a good credit risk. You need to look past the net income amount to evaluate risk. Alternatively, a company may have had a loss in the period but have very little credit risk if they have a strong balance sheet.

We hope you will find this information educational and helpful with your professional career. Please share it with anyone who might also appreciate or benefit from this information. We welcome any comments on this material. We’ve started work on an intermediate series on financial statement analysis and would appreciate any comments, questions or suggestions for topics to cover in that series.