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The three statements, how they connect, and how to test whether the earnings are real: revenue recognition, EBITDA and its add-backs, ratios, and the red flags that come before a restatement.
How net income, cash and retained earnings tie the income statement, balance sheet and cash flow statement into one system.
→Why profit is recorded when it is earned rather than when cash moves, and how accruals, deferrals and prepaids make that work.
→The income statement line by line, from revenue to diluted EPS, with margins, the treasury stock method and GAAP versus IFRS.
→Assets, liabilities and equity line by line, including goodwill, deferred taxes, treasury stock, AOCI and book value per share.
→Operating, investing and financing cash flows, the indirect reconciliation, and exact definitions of FCF, FCFF and FCFE.
→Net working capital, DSO, DIO, DPO and the cash conversion cycle, why growth consumes cash, and the working capital peg in M&A.
→The five-step revenue model worked through bundled contracts, over-time projects, gross versus net and variable consideration.
→Depreciation methods with worked schedules, capitalize versus expense, maintenance capex, impairment, and leases under IFRS 16 and ASC 842.
→What EBIT and EBITDA measure, where EBITDA misleads, and how diligence teams grade add-backs from reported to adjusted EBITDA.
→Profitability, return, liquidity, leverage and efficiency ratios computed for one company, then ROE decomposed with three and five-step DuPont.
→Cash conversion, accruals ratios, DSO creep, reserve releases, the Beneish M-Score and Altman Z-Score, with a red flag checklist.
→What non-GAAP measures are, the SEC rules behind them, worked reconciliations for adjusted EPS, organic growth and FCF, and IFRS 18.
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