FIN -306

FINANCIAL STATEMENT ANALYSIS

3 + 0 Cr

Financial statement analysis is a specialized course in finance stream, aiming to provide students with the basic skills and techniques to analyze financial statements for the purpose of valuation. Understanding and interpreting financial statements and analyzing them will provide a thorough understanding of the overall performance of an enterprise to the students. This course will familiarize students with common sources of business and financial information and will develop their analytical skills. 1. FSA: NATURE AND OBJECTIVES 1.1 1.2 1.3 1.4 1.5 1.6 2. Data Conversion Diagnosis of managerial and operating problem areas Evaluation of management Assessment of financial health of an organization. Forecasting of financial condition Selection of Investment or merger

UNDERSTANDING FINANCIAL STATEMENTS 2.1 Implication of accounting standards, procedures and practices 2.2 Human resources and social accounting 2.3 Auditors report

3.

METHODOLOGY 3.1 Recasting of financial statements 3.2 The principal tools of analysis 3.3 Scope and Limitation of FSA

4.

ANALYSIS OF SHORT TERM FINANCIAL POSITION 4.1 Liquidity 4.2 Adequacy and effective utilization of working capital.

5.

ANALYSIS OF LONG TERM FINANCIAL POSITION 5.1 Long term solvency 5.2 Productive and effective utilization of assets 5.3 Earning power

6.

ANALYSIS OF INCOME PROFITABILITY 6.1 Cost of goods sold and gross profit

6.2

Operating income and operating expenses

7.

ANALYSIS FOR INVESTORS 7.1 The degree of financial leverage 7.2 EPS- P/E ratio 7.3 Dividend payout 7.4 Dividend Yield 7.5 Book value per share 7.6 Stock options 7.7 Stock appreciation rights FUNDS FLOW ANALYSIS 8.1 Analysis of sources of funds 8.2 Analysis of application of funds 8.3 Financial ratios and the SCF

THE REPORT Each student shall be assigned to write report on Financial Statements Analysis of a Business Organization. This shall be mandatory part of the course. The report shall be treated as one of the four assignments.

TEXT BOOK
1.

Gibson, Charles H; Financial Statement Analysis: Using Financing Accounting Information, South Western College Publishing.

REFERENCE BOOKS
1. 2. 3.

Bernstein, Leopold A; Financial Statement Analysis: Theory, Application and Interpretation, Irwin Homewood, Illinios. Stickney, P. Clyde; financial Reporting & Statement Analysis, Dryden Press 1996. White, Gerald I,Sondhi, Ashinwal C, and Fried, Dov; The Analysis and Use of Financial Statements, Johnwiley.