Financial Statement Analysis
Program : MBA Class of : 2010
Credit : 3 Sessions : 33
Course Code : SL FI 611
Objective
To enable students to understand, analyze and interpret the financial statements of all types of business
entity.
REFERENCE BOOKS AUTHOR / PUBLICATION
Financial Statement Analysis ICFAI
Modern Accountancy Mukherjee, A / Hanif, M
Financial Reporting Analysis, 11 e Gibson, Charles H. SouthWestern College
Pub 2008
International Accounting: A User Saudagaran, Shahrokh M. CCH, Inc.
Perspective 2009
th
Comparative International Accounting, 8 Noses, Christopher / Parber, Robert.
e Prentice Hall 2004
Fundamentals of Financial Management, Brigham, Eugene F. / Houston, Joel F.
th
11 e SouthWestern College Pub – 2006
Financial Statement Analysis & Security Penman, Stephen H. McGrawHill – 2006
Valuation
Detailed Syllabus
Understanding Financial Statement: Nature and objectives of Financial Statements, Uses of Financial
Statements, form and content of Financial Statements, users of Financial Statements
Financial Reporting and Regulations: Introduction to USGAAP, Introduction to International
Accounting Standards, Indian Accounting Standards, Applicability of Various Standards, Comparison
and Harmonization
The Annual Report: Content of the annual report, quality of financial reporting, reporting regulation in
India for different types of entities, Directors report and auditors report
Financial Statements: The balance sheet – as per companies act 1956, fixed assets, methods of
depreciation, investments, current assets, loans and advances, methods of inventory valuation, liabilities.
The income statement – requirements as per companies act, revenue recognition, and profit and loss
appropriation account. Notes on accounts and additional information to investors.
Window Dressing: Problems in Financial Statements, Window Dressing, Understanding how income
statement is manipulated and reworking profits, ethical issues in financial reporting, recent scandals in
financial reporting.
Analyzing Multinational Companies: Currency translations, methods of translating financial statements
of a foreign entity, income smoothing, methods of profit manipulation, international taxation.
Auditing and Corporate Governance: American model of corporate governance, German model of
corporate governance, Japanese model of corporate governance, Corporate governance in India, Audit
committee, corporate governance failure at Enron, Issues in internal audit, Sarbanes Oxley Act.
Introduction to Financial Statement Analysis: Sources of information, tools and techniques of financial
statement, economy – industry – company analysis, overview of ratio analysis
Analysis of financial statements of different types of entities: Analyzing financial statements of
Manufacturing companies, nonprofit organizations, trading companies, Utilities companies, software
companies, hotels, hospitals and biotech companies.
Analysis of Financial Statements of Banking Companies: Preparation of bank financial statements,
assets and liabilities of a bank, revenues and expenses of a bank, analysis of banks performance.
Analysis of financial statements of insurance companies: Need for performance measurement,
principles of performance measures, aligning measures throughout the organization, types of performance
measures, operational performance measures, overcoming implementation obstacles and challenges,
performance measures and rewards
Business Combinations and consolidation: Meaning and definition of important terms, types of
business combinations, consolidated financial statements, inter company transactions and profit
confirmations, minority interest, changes in minority interest, consolidated net income and consolidated
retained earnings, changes in ownership, pushdown accounting, accounting for investments in associates,
financial reporting of interests in Joint Ventures
Problem Solving
Topic of coverage Problem Solving
Analyzing Multinational Companies Problems on translations and treatment of exchange differences
Analysis of financial statements of Problems on analyzing financial statements of different types of
different types of entities entities
Analysis of financial statement of Problems on specific ratios relevant for banks
Banking Companies
Business Combinations and Problems on consolidations and accounting for investments in
consolidations associates and financial reporting of interest in joint ventures
Cases
· Standard Chartered Bank: Accounting Policies
· Microsoft Accounting Policies
· Wipro’s Accounting Policies
· Infosys Accounting Policies
· Maruthi Udyog’s Accounting Policies
· BNP Consolidated Accounting
Suggested Schedule of Sessions
Topic No. of Sessions
Understanding Financial Statements 2
Financial Reporting & Regulations 2
The Annual Report 3
Financial Statement 3
Window Dressing 1
Analyzing Multinational Companies 3
Auditing & Corporate Governance 2
Introduction to Financial Statement Analysis 2
Analysis of Financial Statements of different types of entities 4
Analysis of Financial Statements of Banking Companies 3
Analysis of Financial Statements of Insurance Companies 3
Business Combinations and Consolidations 5
Total 33