MBAB 424: Financial Statement Analysis
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,14th 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