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Corporations pay income taxes just like individuals do. It's reported as the final expense in the income statement. For example, in 2018, the final three lines in Exxon Mobil's income statement appeared like this, with all numbers shown in millions. The $9.532...

For a retail company, the most important expense on the income statement is cost of goods sold. However, even in a simple situation, a surprisingly difficult question to answer is, how much is cost of goods sold? Consider these transactions for Ramona Rice Com...

What is the difference between basic earnings per share and diluted earnings per share (EPS)? Basic EPS include preferred shares Basic EPS include net revenue. Diluted EPS are calculated after taxes have been paid. Diluted EPS includes potential shares...

The culmination of the accounting process is the production of the financial statements. And then the real fun begins, the analysis of those financial statements. Users of those financial statements examine those statements to see trends over time. For example...

In fiscal 2018, Walmart's net income was $7.17 billion. In that same fiscal 2018 Target's net income was $2.937 billion. So is Walmart better than Target? At the end of fiscal 2018 Walmart had inventory of $44.269 billion, and Target had inventory of $9.497 bi...

The DuPont Framework is a tool to decompose a company's return on equity into three dimensions, profitability, efficiency, and leverage. Return on equity, or ROE, is a measure of the amount of profit earned per dollar of owner investment. ROE is computed by di...

The benefit of financial leverage is that using borrowed money allows a company to be larger with the same level of shareholder investment. More borrowed money means more assets. More assets means more sales. More sales means more profits. Again, all with the ...

A company's operating cycle is the length of time from when the company buys its inventory until when the company collects the cash associated with selling that inventory. The total length of the operating cycle is the sum of two time periods, the number of da...

Market prices incorporate all kinds of information. For example, the market prices for firms in a given industry include average investor expectations about future earnings growth in that industry and required rates of return for firms in that industry. This i...

Which portion of the DuPont framework shows the amount of sales generated from each dollar of assets? assets to equity profit margin asset turnover (Asset turnover shows the amount of sales generated in relation to assets.) return on equity (Return on ...

You now know about financial statements, the accounting process, important financial accounting topics such as revenue recognition and leases, and financial ratio analysis. But here are some cautions. First, financial statement analysis can't do anything if th...

Hi there, I'm Mike McDonald. I'm a professor of finance, a frequent consultant to industry, and a Wall Street veteran. In this course on financial modeling, I want to show you how to build financial models for use in corporate finance investments and banking. ...

This course is intended for financial professionals interested in learning more about financial modeling. I'm assuming that you're already familiar with basic accounting and finance terms, concepts like the income statement, the balance sheet, and the cashflow...

What is Financial Modeling? At its core, financial modeling is really just a business form of what we call a model. So what is a model? Well it's really a simplified representation of reality. A map is a great example of this. If you think about what a map doe...

Why should you care about financial modeling? In the next few minutes, I'll explain what financial modeling is, and how understanding it can help you move your career forward. For anyone pursuing or advancing a career in corporate development, investment banki...

Financial modeling lets us evaluate very specific sets of circumstances and make decisions based on those situations. Since the kind of decisions we make in business differ under various circumstances, the models that we use to evaluate those decisions differ ...

Effective financial modeling is driven by data, but different types of models require different kinds of data. In the next couple of minutes, I'll show you how to determine what data you will need to build an effective financial model. All businesses have acce...

Identifying the data you need for a financial model is just the first step. You also need to actually go out there and gather that data from various sources. Fortunately, this is easier than it once was. Thanks to some great tools and databases that are availa...

While many financial models may not require special data, some do. In particular, if you're making projections about the future, or about the level of market share a firm will have, it's helpful to have outside data as part of that process.  You can often get...

Building a financial model requires getting your hands dirty by actually demonstrating what will happen in a scenario, using figures and projections in Excel. Throughout this course, I will try to keep us all on the same page by using partially prebuilt Excel ...