Introduction to

Financial &
Economic
Analysis

Costin Ciora
University Lecturer
Department of Financial Analysis & Valuation (AEEF)
The Bucharest University of Economic Studies (ASE)
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 Financial Analysis & Valuation Education
BACHELOR MASTER
1st Semester

+ other
topics
Introduction to Advanced Financial &
Financial & Economic Economic Analysis
Analysis
2nd Semester

Fundamentals of Business
Financial & Economic Valuation
Analysis

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 Course objectives
Learning Outcomes

By the end of this semester you will:

Develop the capacity to identify, model, and interpret economic

and financial indicators for individual enterprises and use the
knowledge obtained in providing a project, assuming responsibility
for a specific task in a multi- specialized team

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 Assessment methods

Seminar activity Final Exam

(minimum 5)

30% 70%

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 The big picture
Basics of Financial and Economic Analysis
Introduction to Financial and Economic Analysis Analysis of the indicators for company size
Expenses Analysis

Fundamentals of Financial and Economic Analysis

Fundamentals of Financial and Economic Analysis

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 The journey
Chapter 1:
1 2 3 Basics of Financial & Economic Analysis

Chapter 2:
7 6 5 4 Analysis of indicators for company size

8 9 10 Chapter 3:
Expenses analysis
11
14 13 12

Ex

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Chapter 1:
Basics of Financial &
Economic Analysis

Chapter content:
1. Financial & Economic Analysis: objective,
definition, typology
2. The system of indicators
3. Methodology
 The journey
Chapter 1:
1 2 3 Basics of Financial & Economic Analysis

Chapter 2:
7 6 5 4 Analysis of indicators for company size

8 9 10 Chapter 3:
Expenses analysis
11
14 13 12

Ex

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 The journey
1 2 3 Lecture 1
Financial & Economic Analysis:
• objective,
7 6 5 4 • definition
• typology
8 9 10
11
14 13 12

Ex

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 Cause

Effect

Result

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 Factors 2nd
rank
Factors 1st
rank
Factors 2nd
Phenomenon rank

Factors 1st Factors 2nd

rank rank

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 What is financial analysis?
Financial statement analysis is a method used to
examine the activity of a company from the economic
point of view.

Financial statement analysis is based on the financial

statements (mainly on the annual information).

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 Example
• A technology company produces 120 computers at a
price of 1.000$ each.

• Revenues (Turnover) of company

• 120 computers x 1.000 $ = 120.000$

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 Example
Quantity
Turnover
Price

120 units
120.000$
1000$

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 Financial Statement Analysis Framework
(set by CFA Institute)
1. Establishing the purpose and context of the analysis

2. Collect input data

3. Process data

4. Interpret the processed data

5. Develop and communicate conclusions and recommendations

6. Follow-up

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 1. Establishing the purpose and context
Example of purposes and TIME for analysis

- Evaluating the company’s financial position or

performance
- Having a credit rating
- For mergers of acquisitions
- For management of the company – annual reports
- Mergers & acquisitions

Output:
- Objective of the analysis
- Analysis questions
- Timetable and budget

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 2. Collect input data

Financial statements
Economic data> macroeconomic ones, sector
Interview with the managers
Statistic information about a sector

Output:
- Spreadsheets
- Datatables and interview sheets

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 Input data

• Company overview
• Macroeconomic level
• Industry
• Competitors
• Risks
• Growth Strategies
• Company’s financial statements
• Company’s non-financial indicators

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 3. Process Data
Using analysis methods to process the collected data.

The analyst will>

- Compute variation of indicators
- Ratios
- Create charts & other methods depending on the
objective

Output:
- Adjusted financial statements

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 4. Interpret the processed data

Perform the interpretation of results

Output:
- Interpretations & analytics

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 4. Interpret the processed data

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 5. Develop and communicate conclusions
and recommendations

The analyst will prepare a financial analysis report,

answering the initial questions and include some chapters
like: business summary, historical performance and
forecasts

Output:
Analytical report and conclusions

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 Source: Twitter Opens Up With I.P.O. Filing. The New York Times
http://dealbook.nytimes.com/2013/10/03/twitter-discloses-its-i-p-o-
plans/?ref=business

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 6. Follow-up

Regularly the analyst will gather data to see the evolution of

the company.

Output:
Updated reports and recommendations

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 In brief
Purpose

Collect
FOLLO
input
W-UP
data

Financial Analysis
Framework
CONCLUSIONS
Process
data

Interpretation

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 What are the information sources used in
financial analysis?

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 Financial Analysis

Financial Statements
Balance Sheet

Income Statement

Cash-flow
Statement

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 Key figures

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 Types of financial analysis

a) Moment of analysis versus moment of actual development

• Post factum or after operations

• Forecast analysis

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 Types of financial analysis

b) Types of economic phenomenon

• Quantitative analysis

• Qualitative analysis

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 Types of financial analysis

c) Level of analysis

• Microeconomic

• Mezoeconomic

• Macroeconomic

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 Types of financial analysis

d) Time dynamics

• Static

• Dynamic

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 Types of financial analysis

e) Time length

• Short term

• Long term

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 Types of financial analysis

f) Criteria for studying the phenomenon

• Technical and economical

• Financial and economical

• Financial

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 Types of financial analysis

g) Position of analyst

• Internal

• External

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 Practical application

Choose a company!

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 Review
Purpose

Collect
FOLLO
input
W-UP
data

CONCLUSIONS
Process
data

Interpretation

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42

References
• V. Robu, I. Anghel, E.C. Serban (coord) – Analiza Economico-
Financiara a firmei, Editura Economica, 2014

• M. Petcu – Analiza economico-financiara, Bucuresti, 2009

• D.D. Popescu – Enterprise analysis, ASE, 2009

• ACCA P3 – Business Analysis, Kaplan Publishing, 2012

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 Thank you for your attention!

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