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Wednesday, October 17, 2012
Tuesday, October 9, 2012
Understanding FSA Concepts and Calculations
In this blog, I illustrate how our “Concept Check” feature
lets you reinforce your understanding of the concepts specific to the topic you
are studying.
By reading other parts of this site or watching the videos,
you have seen how to take information from the statements and construct
ratios. This is the “practice”
part. But you may not be as familiar
with some of the calculated values (blue background) or exactly how they are
calculated. This is where the “Concept
Check” comes in. For the illustration, I
will use the part of profitability analysis that calculates ROA and ROE.
Start by clicking the “Concept Check” icon:
Once you do, you will see:
There are three calculated concepts in this topic:
Net Income Attributable to Shareholders
Return on Assets
Return on Equity
You can learn how each concept is
calculated by simply dragging and dropping the terms themselves into the blank
area on the right, add arithmetic operators, and create a formula. If you click on the Explanation tab, you will
see the definition of each term.
Let’s do an easy one: Net Income Attributable to Shareholders
This is simply Net Income minus
Net Income Attributable to NCI. So
simply drag and drop the two terms and type in a minus sign in between:
By repeating this, you will
become very familiar with both the explanation and the formula underlying a
concept.
If you just want to explore concepts, in any order and
without worrying about where they are used, select the branch “Learn Calculated
Concepts”
If you click on a concept, it will give you a definition,
but will also tell you where it is used.
In the picture, the Accrual Ratio (Balance Sheet) is used in a
sub-branch of “Analyze Earnings Quality” and you can see its definition.
If you select “Learn Calculation,” you will see:
You can again drag and drop the terms to create a formula
and see if you know how the specific concept is calculated:
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