Basic Accounting and Financial Reporting for In-House Attorneys (Part Three): Interpretation, Ratio Analysis, and Selected Technical Areas

Understanding and interpreting financial information is a key skill for in-house counsel. Successfully working in areas including preparation of annual plans and budgets, evaluation of contract or acquisition terms, and review of external reporting information, involves using and interpreting financial statements. This third Briefing builds on the concepts in our first two Basic Accounting and Financial Reporting for In-House Attorneys Briefings:

Basic Accounting and Financial Reporting for In-House Attorneys (Part One): Foundations and the Balance Sheet

Basic Accounting and Financial Reporting for In-House Attorneys (Part Two): The Income Statement and Statement of Cash Flows

Using the tools discussed in these earlier two briefings the discussion will explore using financial statements and ratio analysis to assess a company’s liquidity position, leverage risk and profitability. In addition, more complex areas such as accounting for goodwill and revenue recognition will be discussed. Please join Cheryl L. Linthicum and George M. Wilson of PLI’s SEC Institute as they build a foundational understanding to demystify financial reporting.

In this Briefing faculty will:

• Review the kinds of information that financial statements communicate – 5 minutes
  • Discuss the concepts of financial stability
    • Liquidity – Does a company have enough cash and liquid assets to pay its bills?
    • Leverage risk – Does a company have too much borrowed money and related interest expense?
  • Review the concepts of financial performance – Are we earning a profit or losing money?
    • Increasing or losing resources
• Use ratio analysis, including the current ratio and working capital tools to assess an example company’s liquidity position – 10 minutes
• Apply ratios including debt to equity to understand a company’s liquidity risk – 10 minutes
• Compute return on assets and return on equity to assess a company’s profitability – 10 minutes
• Review when a company records goodwill in an acquisition and the post-acquisition accounting for goodwill – 10 minutes
• Discuss accounting for revenue recognition and other technical areas – 10 minutes
• Discuss how financial information is used in budgeting, deal evaluation and external reporting – 5 minutes
  • Budgeting for cost centers such as a legal department
  • Example deal provisions

Who Should Attend: Attorneys who need a basic understanding of accounting and financial reporting in their practice.

Program Level: Update 

Prerequisites: None 

Advanced Preparation: None