Data Analytics for Business Audit PDF - Albert School

Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché 1st of December Introduction to management control 2h00 15th of December Deep dive in financial reporting 2h00 Data Analytics for audit and compliance 2h00 Python for financial analysis 3h00 Setting up a performance manag...

Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché 1st of December Introduction to management control 2h00 15th of December Deep dive in financial reporting 2h00 Data Analytics for audit and compliance 2h00 Python for financial analysis 3h00 Setting up a performance management dashboard in Power BI 6h00 19th of January 19th and 26th of January 2nd of February and 8th of March Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché “Financial reporting refers to the process of producing financial statements that disclose an organization's financial status to different stakeholders.” 5 BASIC DEFINITION It helps to assess the company's financial health and performance, facilitating informed decisions about investments, credit lending, and management strategies compensation, benefits, and job security viability and profitability of current or potential investments Investors Employees & Unions creditworthiness of the business setting goals & strategic planning Creditors & Lenders Management financial stability as a business partner compliance with financial regulations Regulatory Bodies 6 Suppliers & Customers KEY COMPONENTS OF A FINANCIAL REPORT Balance Sheet – A Snapshot of Financial Health Description: provides a snapshot of a company's financial position at a specific point in time. It lists the company's assets, liabilities, and shareholders' equity. Importance: crucial for assessing the company's financial stability and liquidity. Cash Flow Statement – Understanding Liquidity Description: tracks the flow of cash in and out of the business, categorized into operating, investing, and financing activities. Importance: essential for analyzing the company's liquidity and cash management. 7 Income Statement – Measuring Performance Description: shows the company's revenues and expenses over a specific period, culminating in the net profit or loss. Importance: vital for understanding the company's operational efficiency and profitability. Statement of Shareholders' Equity Description: outlines the changes in the equity section of the balance sheet over a period, including shares issued, dividends, and earnings or losses. Importance: important for shareholders to understand how their equity in the company has changed over time. Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché INCOME STATEMENT 1 2 3 4 5 9 1 - TURNOVER Turnover, in the context of a business's income statement, refers to the total revenue or sales generated by a company during a specific period, usually a fiscal year or quarter. 10 CALCULATING TURNOVER Turnover = Total Sales Revenue Example: a In January, ABC Electronics sold products amounting to $100,000. b In February, sales were $120,000. c In March, sales were $110,000. To calculate the turnover for the first quarter, we would sum up the sales from each month: Turnover=$100,000(January)+$120,000(February)+$110,000(March) a 11 b c Turnover = $330,000 Trend Analysis comparison of the current turnover figures with previous periods Ratio Analysis to assess operational efficiency Customer Analysis how turnover is affected by new customer acquisition and the retention of existing customers Industry Benchmarking company's turnover against industry averages or key competitors Turnover analysis Market and Economic Factors Segmentation Analysis identify which areas are driving sales Growth Rate Analysis understand the company's expansion or contraction. 12 Margin Analysis analyze how much of the turnover is translating into profit evaluate the relevance and competitiveness of the company's offerings in the market 2 – GROSS PROFIT Gross profit is the monetary value that results from subtracting cost of goods sold from net sales, meanwhile Gross margin is a critical financial metric that represents the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. 13 CALCULATING GROSS PROFIT 𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 −𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅 (𝑪𝑶𝑮𝑺) Gross Profit=( ) x 100 % 𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 Example: a b b 14 a Total Revenue for the year: $500,000 b Cost of Goods Sold (COGS) for the year: $300,000 $500 000 −$300 000) ) $500 000 Gross Profit=( x 100 % = 40 % Assessing Profitability Understanding Business Model Comparative Analysis Impact of Pricing Strategies 15 Cost Management Insights Gross Profit Analysis Planning and Forecasting Decision Making for Growth 3 - EBITDA EBITDA stands for 'Earnings Before Interest, Taxes, Depreciation, and Amortization'. It sheds light on how well a company is performing in its day-to-day operations, excluding external financial factors. 16 CALCULATING EBITDA There are two formulas for calculating EBITDA. EBITDA = net income + interest expenses + taxes + depreciation + amortization EBITDA = operating income + depreciation + amortization Steps to determine EBITDA 1. Acquire the business's income statement 2. Identify figures 3. Calculate EBITDA 17 CALCULATING EBITDA Let’s take an example following the 3 steps 1. The owners of DataTech want to know the EBITDA from last year. To gather the relevant information, the owners sent us last year's income statement on Power BI 2. We identified that last year's net income was €2,500,000. They paid €25,000 in interest expenses and €30,000 in taxes. Their depreciation costs were €89,000, and their amortization costs were €22,700. 3. DataTech uses its net income to calculate its EBITDA. Its EBITDA equation is: EBITDA = €2,500,000 + €25,000 + €30,000 + €89,000 + €22,700 This means its total EBITDA for last year is €2,666,700. 18 4 - DEPRECIATION AND AMORTIZATION Depreciation and Amortization are accounting methods used to allocate the cost of tangible and intangible assets over their useful life. They are crucial for accurately representing the value of assets and expenses on a company's financial statements. 19 4 - DEPRECIATION AND AMORTIZATION Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. It applies to : machinery buildings vehicles equipment Amortization refers to the accounting technique of gradually writing off the initial cost of an intangible asset over its useful life. Intangible assets are non-physical assets like : ▪ Patents ▪ Copyrights ▪ Trademarks ▪ Software ▪ goodwill 20 Methods of Depreciation & Amortization : Straight-Line Method: The most straightforward method, dividing the asset's cost by its useful life. Declining Balance Method: A faster depreciation method where a fixed percentage of the asset's book value is depreciated each year. Units of Production Method: Based on the asset's usage or output, rather than time CALCULATING DA Annual Depreciation Expense Depreciable Amount = Asset Cost Salvage Value Depreciable Amount) =( ) Useful Life Example (Straight-Line Method) : a Asset Cost: $10,000 (e.g., machinery) b Useful Life: 5 years c Salvage Value: $2,000 (estimated value at the end of its useful life) a c d Depreciable Amount = $10,000 - $2,000 = $8,000 21 d b Annual Depreciation Expense = $8,000 / 5 = $1,600 5 - NET PROFIT Net Income / Net Profit is the total profit of a company after all expenses have been deducted from its total revenue. It's often referred to as the "bottom line" because it appears at the bottom of the income statement and indicates the company’s profitability over a specific accounting period. 22 CALCULATING NET PROFIT Net Income=Total Revenue − COGS− Operating Expenses − Other Expenses + Other Income − Interest − Taxes 23 USE CASE - Act as a Financial Data Analyst Produce the 2021 and 2022 P&L of the Matching entity and answer the following questions, for each years : ▪ ▪ ▪ What is the turnover total sales? What is the EBITDA ? What is the net profit? Deep dive In the analysis and tell me: ▪ For 2022 what is the Top 5 agencies and Bottom 5 agencies in terms of Turnover, are they the same in EBITDA ? ▪ In terms of Gross Profit what agency is the top performing vs LY ? Think your solution as the most scalable 25 Albert Global Data School - Data Analytics for Business Audit - Antoine Bosché