Management Studies

SEMESTER II

MBAB 424: FINANCIAL STATEMENT ANALYSIS

Hard Core: 3 Credit

Prerequisite: Basic knowledge in Financial Accounting

Learning Objective:

1.     To analyze and interpret Financial statements for Managerial Decision Making

2.     To understand the role of Information Technology for analyzing Financial Statements

Learning outcome:

1.      To gain knowledge and skills in analyzing and interpreting financial statements.

2.      To acquire knowledge to apply efficient and effective approach to rescheduling, interpreting and analyzing financial statements

Methodology:

Lecture, Discussions, Exercise, Case studies, Assignments and mini projects

Unit I: Financial Analysis Tools and Techniques- Objectives of Financial Statement Analysis – Horizontal vs. Vertical Analysis - Tools and Techniques of Financial Statement Analysis – Sources of Information – Standards for Comparison – Comparative, Common-Size and Trend Analysis.

Unit II: Ratio Analysis Classification – Profitability Ratios - Short Term Liquidity Ratios - Operating Performance and Efficiency Ratios– Capital Structure and Long Term Solvency Ratios – Market measures Ratio – Analyzing Bank Financial Statements – Ratios for Trading, Manufacturing and Service organizations. Forecasting Financial Statements - One Year Projection – Sensitivity Analysis – Contribution Margin Analysis – Projecting Financial Flexibility – Multiyear Projection

Unit III: Fund and Cash Flow Analysis- Concept of Funds – Funds Flow Statement – Statement of Changes in working capital - Calculation of Funds from operation – Sources of Funds – Applications of Funds – Preparation of Funds Flow Statement. Uses and Structure of Cash Flow Statement – Preparation of Cash flow statement – Determining Net Cash flow from Operating Activities - Direct and Indirect Method - Determining Cash flow from Investing Activities - Determining Net Cash flow from Financing Activities – Reporting Cash Flows – Interpreting the Cash Flow Statement.

Unit IV: Cost-Volume-Profit Analysis- Marginal Costing – Assumptions of Marginal Costing – Marginal Costing vs. Absorption Costing – Profit /Volume Ratio – Cost-Volume-Profit Analysis – Break-Even Analysis – Margin of Safety – Managerial Applications of Marginal Costing.

Unit V: Budgetary Control and Variance Analysis- Budget, Budgeting and Budgetary Control – Essentials of Budgetary Control – Budgeting vs. Forecasting –Classification and Types of Budgets – Zero-Base Budgeting – Activity based Budgeting – Analysis of variance –Material, Labour, Overhead and Sales variances.

Text Books and Reference Books:

1.      MartinS. Fridson, Fernando Alvarez, Financial Statement Analysis: A Practitioner's Guide, Wiley India Private Ltd Finance, Fifth Edition,2019-20.

2.      ShashiK.Gupta&R.K.Sharma,ManagementAccountingPrinciplesandPractice,KalyaniPublishers,14^th Edition,2019-20.

3.      K.Scott Proctor, Building Financial Models with Microsoft Excel–A Guide for Business Professionals, Wiley India Private Ltd Finance,2019-20.

4.      JohnJ.Wild, K.R.Subramanyam, Financial Statement Analysis, Mc Graw Hill Education, Latest edition

Open Resources: https://swayam.gov.in/course,  http://www.iibf.org.in, https://students.icai.org

Tools/Software: MS Excel, Power BI, Tableau