Analysis of Financial Statements
Content
NATIONAL UNIVERSITY OF MODERN LANGUAGES FACULTY OF MANAGEMENT SCIENCES
COURSE OUTLINE
MBA-III & IV Course Title: An l!sis o" Fin n#i l St te$ents Course Co%e:&&' Cre%it (ours: )* Course Instru#tor: +rere,uisites: Financial Accounting, Managerial Accounting, Financial Management Te-t.oo/s 0or Course M teri ls1 23 T4e An l!sis n% use o" Fin n#i l St te$ents30*r% E%ition1 By:Gerald I. White, Ashwinpaul C. Sondhi, and o! Fried. 53 *3 '3 Fin n#i l St te$ent An l!sis Usin6 Fin n#i l A##ountin6 In"or$ tion3 07t4 E%ition1 By:Charles ". Gi#son Fun% $ent ls o" Cor8or te Fin n#e 0&t4 E%ition C4 8ter 9 2: onl!1 By:Brealey$Myers$Marcus Fun% $ent ls o" Cor8or te Fin n#e30;t4 E%ition C4 8ter 9 ' onl!1 By:%oss$Wester&ield$'ordan
Course Des#ri8tion: (his course is an introduction to &inancial statement analysis, aiming to pro!ide you the #asic s)ills and techni*ues to analy+e &inancial statements &or the purpose o& !aluation. ,ou will learn how to e!aluate &inancial statements and per&orm prospecti!e, credit, and e*uity analyses. Students will also learn how to recast and ad-ust &inancial statements to o#tain a #etter estimate o& earning power. Re"eren#e M teri l Annual %eports o& .u#lic /imited Companies Course O.<e#ti=es: Financial reports are the primary means #y which managers communicate company results to in!estors, creditors and analysts. (hese parties use the reports to -udge company per&ormance, to assess creditworthiness, to predict &uture &inancial per&ormance, and to analyse possi#le ac*uisitions and ta)e0o!ers. 1sers o& &inancial statements must #e a#le to meaning&ully interpret &inancial reports, construct measures o& &inancial per&ormance and analyse the reporting choices made #y companies. Also, since company managers choose accounting techni*ues when ma)ing their reports, users must learn to undo the e&&ects o& these accounting choices. (he purpose o& this course is to gi!e the &oundation &or such analysis. Course Out#o$es: 2n completion o& this course unit, success&ul students will #e a#le to: 3 Calculate and interpret a range o& accounting ratios &rom the &inancial statements o& large companies4 3 Appreciate the comple5 nature o& real li&e &inancial statement ratio calculations4 3 1nderstand the role o&, and draw upon, the strategic 6competiti!e and sustaina#ility7 conte5t o& a #usiness in interpreting that #usiness8s &inancial statements4
3 9&&ecti!ely interpret &inancial statements &rom the perspecti!e o& the &orward0loo)ing in&ormation needs o& di&&erent sta)eholders4 3 1nderstand a range o& &actors that can indicate the *uality and relia#ility o& &inancial statement in&ormation4 3 Appreciate the !arious sources o& data that may #e use&ul in analy+ing the position, per&ormance and &uture prospects o& a &irm Assess$ent Instru$ent >it4 ?ei64ts Assignments : ;ui++es<<<<<<<<<<..=>? Semester .ro-ect<<<<<.<<<<<<...<=>? Mid0(erm 95am<<<<<<<<<<<..<..@>? Final 95am<<<<<<<<<<<<...<<..A>? Tot l@@@@@@@@@@@@@@@@@332))A
?ee/ 9
Le#ture 9
TO+ICS TO BE COVERED
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=. Introduction to Analysis o& Financial Statements, 1tili+ation and .racticality o& the Course B. Fr $e>or/ "or Fin n#i l St te$ents An l!sis Ceed &or &inancial statement analysis, 1sers o& &inancial statements .rincipal &inancial statements ;ualitati!e characteristics o& accounting data C4 8ter 9 2 0Son%4i1 C4 8ter 9 2 0Gi.son1 @. Fr $e>or/ "or Fin n#i l St te$ents An l!sis@3 GAA. C4 8ter 9 2 0Son%4i1 C4 8ter 9 2 0Gi.son1 D. A##ountin6 +oli#ies n% t4eir I$8 #t on Fin n#i l An l!sis@3 2!er!iew o& Accounting Cycle AuditorEs %eport and its types C4 8ter 9 5 0Son%4i1 C4 8ter 9 5 0Gi.son1 A. A##ountin6 +oli#ies n% t4eir I$8 #t on Fin n#i l An l!sis@3 (he accrual concept o& income %e!enue recognition methods .ercentage0o&0Completion Method Completed contract method C4 8ter 9 5 0Son%4i1 C4 8ter 9 5 0Gi.son1 F. A##ountin6 +oli#ies n% t4eir i$8 #t on Fin n#i l An l!sis@@3 Conrecurring items Ad-ustments &or Conrecurring items Management iscretion and 9arnings Manipulation C4 8ter 9 5 0Son%4i1 G. C s4 Flo> St te$ent An l!sis Ceed &or a Cash Flow Statement Importance o& Cash Flow Statement C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 H. C s4 Flo> St te$ent An l!sis@3 Basic 9lements o& Cash Flow statement Cash Flow Classi&ication Issues C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 I. C s4 Flo> St te$ent An l!sis@3
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F.
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=D.
irect and Indirect cash &low method .reparation o& Cash Flow Statement C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 C s4 Flo> St te$ent An l!sis@3 Analysis o& cash &low in&ormation Free Cash Flows and Jaluation C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 Foun% tions o" R tio n% Fin n#i l An l!sis .urpose and use o& ratio analysis Cautionary Cote C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & 0Gi.son1 Foun% tions o" R tio n% Fin n#i l An l!sis@33 Common si+e statements Jertical and "ori+ontal Analysis Case Study: Cooper (ire : %u##er Company. C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & 0Gi.son1 Foun% tions o" R tio n% Fin n#i l #ont@ Categories o& ratios: /i*uidity analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & & 7 0Gi.son1 Foun% tions o" R tio n% Fin n#i l #ont@ Acti!ity analysis .ro&ita#ility analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & & 7 0Gi.son1
MID TERM EBAMS MID TERM BREAC
=A Foun% tions o" R tio n% Fin n#i l #ont@ /ong0term de#t and sol!ency analysis %atios: An integrated analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 : & D 0Gi.son1 =F Foun% tions o" R tio n% Fin n#i l #ont@ 9arning per share and other ratios used in !aluation (rend Analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 2) 0Gi.son1 =G Foun% tions o" R tio n% Fin n#i l #ont@ 2perating and &inancial le!erage /e!erage and its e&&ect on earnings C4 8ter 9 ' 0Son%4i1 C4 8ter 9 ; & 2) 0Gi.son1 =H Foun% tions o" R tio n% Fin n#i l #ont@ 2perating and &inancial le!erage /e!erage and its e&&ect on earnings Case Study: K(he Case o& the Beleaguered, Burgled Balance SheetL C4 8ter 9 ' 0Son%4i1 C4 8ter 9 ; & 2) 0Gi.son1 =I St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 B> St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies
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C4 8ter 9 2& 0Gi.son1 St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 An l!sis o" In=entories In!entory and cost o& goods sold: Basic relationships /IF2 Jersus FIF2: Income, Cash &low, and wor)ing capital e&&ect C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories In!entory and cost o& goods sold: Basic relationships /IF2 Jersus FIF2: Income, Cash &low, and wor)ing capital e&&ect C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories #ont@ Ad-ustments &rom /IF2 to FIF2 Financial ratio: /IF2 Jersus FIF2 C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories #ont@ Ad-ustments &rom /IF2 to FIF2 Financial ratio: /IF2 Jersus FIF2 C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 Fin n#i l +l nnin6 n% Fore# stin6 Introduction to #asic &inancial planning models A simple &inancial planning model (he .ercentage o& sales approach C4 8ter 9 ' 0RossF?ester"iel%FGor% n1 C4 8ter 9 2: 0Bre le!FM!ersFM r#us1 Fin n#i l +l nnin6 n% Fore# stin6@@3 Additional$95ternal &und needed Additional$95ternal &inancing and growth C4 8ter 9 ' 0RossF?ester"iel%FGor% n1 C4 8ter 9 2: 0Bre le!FM!ersFM r#us1 END TERM EBAMS
COURSE OUTLINE
MBA-III & IV Course Title: An l!sis o" Fin n#i l St te$ents Course Co%e:&&' Cre%it (ours: )* Course Instru#tor: +rere,uisites: Financial Accounting, Managerial Accounting, Financial Management Te-t.oo/s 0or Course M teri ls1 23 T4e An l!sis n% use o" Fin n#i l St te$ents30*r% E%ition1 By:Gerald I. White, Ashwinpaul C. Sondhi, and o! Fried. 53 *3 '3 Fin n#i l St te$ent An l!sis Usin6 Fin n#i l A##ountin6 In"or$ tion3 07t4 E%ition1 By:Charles ". Gi#son Fun% $ent ls o" Cor8or te Fin n#e 0&t4 E%ition C4 8ter 9 2: onl!1 By:Brealey$Myers$Marcus Fun% $ent ls o" Cor8or te Fin n#e30;t4 E%ition C4 8ter 9 ' onl!1 By:%oss$Wester&ield$'ordan
Course Des#ri8tion: (his course is an introduction to &inancial statement analysis, aiming to pro!ide you the #asic s)ills and techni*ues to analy+e &inancial statements &or the purpose o& !aluation. ,ou will learn how to e!aluate &inancial statements and per&orm prospecti!e, credit, and e*uity analyses. Students will also learn how to recast and ad-ust &inancial statements to o#tain a #etter estimate o& earning power. Re"eren#e M teri l Annual %eports o& .u#lic /imited Companies Course O.<e#ti=es: Financial reports are the primary means #y which managers communicate company results to in!estors, creditors and analysts. (hese parties use the reports to -udge company per&ormance, to assess creditworthiness, to predict &uture &inancial per&ormance, and to analyse possi#le ac*uisitions and ta)e0o!ers. 1sers o& &inancial statements must #e a#le to meaning&ully interpret &inancial reports, construct measures o& &inancial per&ormance and analyse the reporting choices made #y companies. Also, since company managers choose accounting techni*ues when ma)ing their reports, users must learn to undo the e&&ects o& these accounting choices. (he purpose o& this course is to gi!e the &oundation &or such analysis. Course Out#o$es: 2n completion o& this course unit, success&ul students will #e a#le to: 3 Calculate and interpret a range o& accounting ratios &rom the &inancial statements o& large companies4 3 Appreciate the comple5 nature o& real li&e &inancial statement ratio calculations4 3 1nderstand the role o&, and draw upon, the strategic 6competiti!e and sustaina#ility7 conte5t o& a #usiness in interpreting that #usiness8s &inancial statements4
3 9&&ecti!ely interpret &inancial statements &rom the perspecti!e o& the &orward0loo)ing in&ormation needs o& di&&erent sta)eholders4 3 1nderstand a range o& &actors that can indicate the *uality and relia#ility o& &inancial statement in&ormation4 3 Appreciate the !arious sources o& data that may #e use&ul in analy+ing the position, per&ormance and &uture prospects o& a &irm Assess$ent Instru$ent >it4 ?ei64ts Assignments : ;ui++es<<<<<<<<<<..=>? Semester .ro-ect<<<<<.<<<<<<...<=>? Mid0(erm 95am<<<<<<<<<<<..<..@>? Final 95am<<<<<<<<<<<<...<<..A>? Tot l@@@@@@@@@@@@@@@@@332))A
?ee/ 9
Le#ture 9
TO+ICS TO BE COVERED
=.
B.
@.
D.
A.
=. Introduction to Analysis o& Financial Statements, 1tili+ation and .racticality o& the Course B. Fr $e>or/ "or Fin n#i l St te$ents An l!sis Ceed &or &inancial statement analysis, 1sers o& &inancial statements .rincipal &inancial statements ;ualitati!e characteristics o& accounting data C4 8ter 9 2 0Son%4i1 C4 8ter 9 2 0Gi.son1 @. Fr $e>or/ "or Fin n#i l St te$ents An l!sis@3 GAA. C4 8ter 9 2 0Son%4i1 C4 8ter 9 2 0Gi.son1 D. A##ountin6 +oli#ies n% t4eir I$8 #t on Fin n#i l An l!sis@3 2!er!iew o& Accounting Cycle AuditorEs %eport and its types C4 8ter 9 5 0Son%4i1 C4 8ter 9 5 0Gi.son1 A. A##ountin6 +oli#ies n% t4eir I$8 #t on Fin n#i l An l!sis@3 (he accrual concept o& income %e!enue recognition methods .ercentage0o&0Completion Method Completed contract method C4 8ter 9 5 0Son%4i1 C4 8ter 9 5 0Gi.son1 F. A##ountin6 +oli#ies n% t4eir i$8 #t on Fin n#i l An l!sis@@3 Conrecurring items Ad-ustments &or Conrecurring items Management iscretion and 9arnings Manipulation C4 8ter 9 5 0Son%4i1 G. C s4 Flo> St te$ent An l!sis Ceed &or a Cash Flow Statement Importance o& Cash Flow Statement C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 H. C s4 Flo> St te$ent An l!sis@3 Basic 9lements o& Cash Flow statement Cash Flow Classi&ication Issues C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 I. C s4 Flo> St te$ent An l!sis@3
=>.
==.
F.
=B
=@.
G.
=D.
irect and Indirect cash &low method .reparation o& Cash Flow Statement C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 C s4 Flo> St te$ent An l!sis@3 Analysis o& cash &low in&ormation Free Cash Flows and Jaluation C4 8ter 9 * 0Son%4i1 C4 8ter 9 22 0Gi.son1 Foun% tions o" R tio n% Fin n#i l An l!sis .urpose and use o& ratio analysis Cautionary Cote C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & 0Gi.son1 Foun% tions o" R tio n% Fin n#i l An l!sis@33 Common si+e statements Jertical and "ori+ontal Analysis Case Study: Cooper (ire : %u##er Company. C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & 0Gi.son1 Foun% tions o" R tio n% Fin n#i l #ont@ Categories o& ratios: /i*uidity analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & & 7 0Gi.son1 Foun% tions o" R tio n% Fin n#i l #ont@ Acti!ity analysis .ro&ita#ility analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 & & 7 0Gi.son1
MID TERM EBAMS MID TERM BREAC
=A Foun% tions o" R tio n% Fin n#i l #ont@ /ong0term de#t and sol!ency analysis %atios: An integrated analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 : & D 0Gi.son1 =F Foun% tions o" R tio n% Fin n#i l #ont@ 9arning per share and other ratios used in !aluation (rend Analysis C4 8ter 9 ' 0Son%4i1 C4 8ter 9 2) 0Gi.son1 =G Foun% tions o" R tio n% Fin n#i l #ont@ 2perating and &inancial le!erage /e!erage and its e&&ect on earnings C4 8ter 9 ' 0Son%4i1 C4 8ter 9 ; & 2) 0Gi.son1 =H Foun% tions o" R tio n% Fin n#i l #ont@ 2perating and &inancial le!erage /e!erage and its e&&ect on earnings Case Study: K(he Case o& the Beleaguered, Burgled Balance SheetL C4 8ter 9 ' 0Son%4i1 C4 8ter 9 ; & 2) 0Gi.son1 =I St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 B> St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies
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=>
B=
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BB
B@
=B
BD
BA
=@.
BF
BG =D BH
C4 8ter 9 2& 0Gi.son1 St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 St te$ent An l!sis "or S8e#i l In%ustries: Ban)s, 1tilities, 2il and Gas, (ransportation, Insurance, %eal 9state Companies C4 8ter 9 2& 0Gi.son1 An l!sis o" In=entories In!entory and cost o& goods sold: Basic relationships /IF2 Jersus FIF2: Income, Cash &low, and wor)ing capital e&&ect C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories In!entory and cost o& goods sold: Basic relationships /IF2 Jersus FIF2: Income, Cash &low, and wor)ing capital e&&ect C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories #ont@ Ad-ustments &rom /IF2 to FIF2 Financial ratio: /IF2 Jersus FIF2 C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 An l!sis o" In=entories #ont@ Ad-ustments &rom /IF2 to FIF2 Financial ratio: /IF2 Jersus FIF2 C4 8ter 9 ; 0Son%4i1 C4 8ter 9 7 0Gi.sonE 83 5;&1 Fin n#i l +l nnin6 n% Fore# stin6 Introduction to #asic &inancial planning models A simple &inancial planning model (he .ercentage o& sales approach C4 8ter 9 ' 0RossF?ester"iel%FGor% n1 C4 8ter 9 2: 0Bre le!FM!ersFM r#us1 Fin n#i l +l nnin6 n% Fore# stin6@@3 Additional$95ternal &und needed Additional$95ternal &inancing and growth C4 8ter 9 ' 0RossF?ester"iel%FGor% n1 C4 8ter 9 2: 0Bre le!FM!ersFM r#us1 END TERM EBAMS
