Financial Concepts Refresher

Map how funds flow among households, companies, governments, financial intermediaries, and capital markets.

Calculate the future value of a single cash flow using simple and compound interest.

Calculate the present value of a single future cash flow using an appropriate discount rate.

Calculate present and future values of annuities and perpetuities.

Calculate and interpret holding-period returns for an investment.

Annualize returns and compare investments held for different periods.

Convert among nominal, effective annual, and inflation-adjusted interest rates in a spreadsheet.

Use the accounting equation to record the effect of simple business transactions.

Distinguish cash accounting from accrual accounting using revenue and expense examples.

Construct a basic income statement from an adjusted trial balance.

Construct a classified balance sheet from account balances.

Classify cash flows as operating, investing, or financing activities.

Reconcile net income to operating cash flow using non-cash items and working-capital changes.

Locate and navigate the audited financial statements and notes in a public company's annual filing.

Perform horizontal analysis to identify material changes in financial-statement accounts.

Prepare common-size income statements and balance sheets for cross-company comparison.

Assess how revenue recognition and receivables affect reported earnings and cash flow.

Assess how inventory accounting affects cost of sales, profit, and working capital.

Relate capital expenditure, depreciation, and asset disposals across the three statements.

Assess how leases affect assets, liabilities, earnings, and cash-flow presentation.

Normalize reported earnings for non-recurring items and identify basic earnings-quality warning signs.

Calculate and interpret short-term liquidity ratios.

Calculate and interpret working-capital efficiency ratios.

Calculate and interpret leverage and interest-coverage ratios.

Calculate and interpret gross, operating, and net profitability margins.

Decompose return on equity using the DuPont framework.

Benchmark a company's ratios against its own history and a relevant peer group.

Build an Excel or Google Sheets dashboard that summarizes financial trends and key ratios.

Distinguish the economic roles and payoff structures of equities, bonds, funds, and basic derivatives.

Explain how securities are issued in primary markets and traded in secondary markets.

Use bid–ask quotes and common order types to estimate the cost and execution risk of a trade.

Calculate the price and yield of a plain-vanilla coupon bond.

Explain how interest-rate changes affect bond prices and duration-based interest-rate risk.

Compare major global market indices by weighting method, constituents, and benchmark purpose.

Trace how changes in growth, inflation, interest rates, and exchange rates can affect markets and company results.

Calculate expected return, variance, and standard deviation from an investment return series.

Calculate covariance and correlation between two investments in a spreadsheet.

Distinguish systematic risk from company-specific risk and explain which risk diversification can reduce.

Estimate a stock's beta from market and stock returns using spreadsheet regression.

Estimate the required return on equity using the Capital Asset Pricing Model.

Estimate a company's pre-tax and after-tax cost of debt from market information.

Calculate and interpret a company's weighted average cost of capital.

Identify incremental, opportunity, sunk, and externality-related cash flows in an investment proposal.

Calculate a project's unlevered free cash flows from operating and investment assumptions.

Evaluate an investment proposal using net present value.

Calculate internal rate of return and resolve common conflicts between IRR and NPV.

Perform scenario and sensitivity analysis on a capital-investment model.

Calculate operating break-even and assess how operating leverage affects business risk.

Evaluate the trade-offs among reinvestment, acquisitions, debt repayment, dividends, and share repurchases.

Forecast revenue using explicit volume, price, market-share, or segment drivers.

Forecast operating costs and margins using fixed and variable cost assumptions.

Forecast receivables, inventory, and payables using operating-cycle drivers.

Forecast capital expenditure and depreciation using an asset schedule.

Construct a monthly cash budget and identify external financing needs.

Calculate price, volume, and cost variances between actual and budgeted results.

Build a compact three-statement forecast with internally consistent assumptions.

Map a company's business model, revenue sources, cost drivers, and value chain.

Assess an industry's structure and a company's competitive position using a structured framework.

Evaluate management incentives, ownership, and board governance using public disclosures.

Extract decision-relevant information from earnings releases, investor presentations, and earnings-call transcripts.

Select operating and financial key performance indicators appropriate to a company's business model.

Translate macroeconomic and industry developments into company-specific forecast assumptions.

Formulate an investment thesis with explicit catalysts, risks, and disconfirming evidence.

Reconcile enterprise value with equity value using cash, debt, and other claims.

Select and calculate valuation multiples appropriate to a company's economics and capital structure.

Construct a comparable-company analysis using a defensible peer group and normalized metrics.

Calculate free cash flow to the firm from forecast financial statements.

Estimate terminal value using both perpetual-growth and exit-multiple methods.

Build a discounted cash flow valuation and test its sensitivity to key assumptions.

Triangulate DCF and relative-valuation results to derive a valuation range and margin of safety.

Translate an investor's objectives, horizon, liquidity needs, and risk tolerance into portfolio constraints.

Compare the risk, return, liquidity, and currency exposure of major asset classes.

Construct a diversified asset allocation using correlations and portfolio risk estimates.

Evaluate an index fund or ETF using mandate, holdings, cost, tracking difference, and liquidity.

Measure portfolio performance against an appropriate benchmark.

Apply threshold-based or calendar-based rebalancing to a portfolio.

Use a decision checklist to reduce overconfidence, confirmation bias, loss aversion, and performance chasing.

Define an answerable company-analysis question and assemble reliable financial and market data for it.

Standardize a selected company's historical statements in a spreadsheet model.

Develop a driver-based forecast for the selected company's operating performance and financial position.

Estimate the selected company's cost of capital and intrinsic value using a discounted cash flow model.

Value the selected company using a comparable-company analysis.

Stress-test the investment case and quantify the effect of major downside scenarios.

Write and deliver a concise investment recommendation supported by evidence, valuation, catalysts, and risks.