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Overview
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. After briefly reviewing the foundational concepts and balance sheet information from the first briefing of this two-part series, discussion will build an understanding of the income statement (frequently referred to as the profit and loss or P&L statement) and the statement of cash flows. Discussion will focus on interpreting the profitability and cash flow information communicated in these two financial statements. 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 information that financial statements communicate– 5 minutes
- Financial performance and stability
- Articulate the communication foundations of financial reporting – 5 minutes
- Definitions and examples – assets, liabilities, equity, etc.
- Definitions and examples of revenue, expense, and net income
- How the definitions are used to communicate information in the income statement and statement of cash flows
- How the income statement and balance sheet are related
- Explain the structure and components of the income statement – 10 minutes
- Revenues
- Expenses
- Net income
- Analyze the information communicated in the income statement – 10 minutes
- Net income or net loss – increasing or using resources
- Evaluation of reasonableness of return
- Explain the structure and components of the statement of cash flows – 10 minutes
- Operating cash flows
- Investing cash flows
- Financing cash flows
- Analyze the information communicated in the statement of cash flows – 10 minutes
- Increasing cash or using cash
- How cash is deployed by the business
- Discuss how financial information is used in budgeting, deal evaluation and external reporting – 10 minutes
- Budgeting for cost centers such as a legal department
- Example deal terms evaluation
Before or after this briefing you will want to listen to Basic Accounting and Financial Reporting for In-House Attorneys (Part One): Foundations and the Balance Sheet and Basic Accounting and Financial Reporting for In-House Attorneys (Part Three): Interpretation, Ratio Analysis, and Selected Technical Areas.
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