Financial Analysis

The ultimate purpose of Financial Analysis is to make performance comparable—over time and across companies. Financial analysis thereby typically focuses on six main elements of “performance:” The firm’s liquidity, activity, financing policy, profitability, payout policy, and value creation.

Course picture financial analysis

In this course, we learn how to conduct financial analysis. The course proceeds in 5 main steps:


  1. The basic accounting framework and common-size financial statements

  2. The most important financial ratios

    • Liquidity

    • Activity

    • Financing policy

    • Profitability

    • Payout policy

  3. Focus: Return on Equity (ROE) and its determinants

  4. Measuring value creation

  5. Comprehensive case study


For each topic, there is a short reading assignment, followed by some review questions and practice examples. Throughout the course, we apply the tools and instruments of financial analysis to one specific company, The Hershey Company. This allows us to also discuss the links between the various dimensions of performance and, thereby, derive a more comprehensive picture of the financial situation of a company. 


One important dimension of Financial Analysis is the ability to understand how much cash a firm generates and what the different sources and uses of cash are. This is the topic of the course "Financial Planning" and will not be discussed in detail in this course.