Sukkur IBA University

FACULTY OF BUSINESS ADMINISTRATION

Analysis of Financial Statements (BSAF-402)
Course Outline
1. Course Identification and General Information

Program and Class: BSAF- VII Semester: Fall-2023

Credit Hours: 03 Instructor: Muhammad Asim
E-mail: asim.shaikh@iba-suk.edu.pk
Office Location: Room 302, Admin Block
Pre-requisite Course: N/A Counseling Hours: Via Phone or email for
appointment

2. Schedule of Assessment Tasks for Students during the Semester

S.No: Assessment Task (e.g. essay, test, group Week Due Proportion of Final
project, examination etc.) Assessment/Marks
1 Written analysis of financial statements and 5
other material information disclosures
2 Class Discussion 10
3 Project Report 13 10

4 Presentation 14 5
5 Mid-Term Academic 30
Calendar
6 Final Exam Academic 40
Calendar

3. Learning Resources
I- Recommended Books:
1. Financial Reporting, Financial Statement Analysis and Valuation: A Strategic
Perspective, 7/e by James M. Wahlen,Stephen P. Baginski, and Mark Bradshaw

2. Financial Statement Analysis: Valuation, Credit Analysis, Executive Compensation

By: Christian V. Petersen & Thomas Plenborg.
II- Reference Books/ Material
1. Notes Provided by Instructor
2. Financial reporting & Analysis: Using Financial Accounting Information by: Charles
H. Gibson, South Western Cengage Learning 12th Edition.

III- Electronic Materials, Web Sites etc.

Electronic material if any would be shared in class

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Analysis of Financial Statements BSAF-VII, Course Outline Fall-2021.
 IV- Other Learning Material (such as computer-based programs/CD, professional
standards/regulations) PowerPoint lecture presentations, assignments and other required
readings will be shared in class.
4. Course Overview:
Analysis of financial statements is the application of analytical tools, technology and
techniques to general-purpose financial statements and related data to derive estimates and
inferences useful in business analysis. The course aims to provide participants with an
understanding of the use of financial statement information from a user perspective such as
equity investor, debtholder, financial analyst and manager. Participants will develop skills in
analyzing financial statements for investment, credit and other business decisions.

5. Course Learning Outcomes (CLOs)

i. Students will able to critically evaluate assumptions and limitations of various financial
tools (ratios).
ii. Students will be able to calculate various financial ratios of companies by using
financial statements
iii. Students will be able to use profitability, liquidity, leverage, and other investors’
specific ratios to make business decisions.
iv. Students will be able to analyze non-financial data provided in annual reports.
v. Students will be able to develop and present project report in groups based financial
and non-financial analysis of a company.
vi. Students will be able to present effectively the financial analysis of a company in the
class
vii. Students will be able to analyze the flexibility provided in IFRS

6. Assessment Task Description

a) Assignment
Students will be required to submit the analysis on assigned topic related financial and non-
financial disclosures from the annual report of a listed company.
b) Class Discussions
Students will be provided actual financial statements and other material information
disclosures of the listed companies by the instructor. Students will be required to come
prepared in the class for discussion.
c) Project
Students have to develop equity research report on a company assigned by instructor. The
contents of equity research report will be discussed in the class and a sample for equity
research report will be provided for reference. Furthermore, students are required to present
the report in the class.
Students will be assessed on following areas
1. Analytical skills (problem identification, analyzing and provide recommendations)
2. Written communication skills
3. Oral communication skills
4. Use of interactive graphs and illustrations for representing data

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Analysis of Financial Statements BSAF-VII, Course Outline Fall-2021.
 7. Lesson Plan & week wise Schedule

Suggested
Discussion Topic
Week Assignments/Quizzes Reading
1 Introduction Analysis of Financial Statement
 Importance of the financial analysis Notes will be
 What are the implications of analysis of provided by
financial statement? instructor
 What is fundamental analysis? (Introduction to
 What is technical analysis? Fundamental
 Qualitative Factors: The company and The Analysis)
Industry
 Introduction to Financial Statement
o The Income Statement
o The Balance Sheet
o The Cash Flow Statement
2 Accruals-based versus cash-flow based Part-1 Chapter-03
performance (See recommended
 Accruals based performance measures book)
 Cash-flow based performance measure

3 Importance of cash based performance Notes will be

 Why Cash Matters? Note: Harvard provided by
o The importance of understanding a Business Publisher: instructor
cash flow statement Why cash matters?
o Cash is king
Note: Harvard
o Power cash flow
Business Publisher:
o Free cash flow and its implications cash, receivables and
 Relationship of cash, receivables and revenue recognition
revenue recognition
4 Corporate governance Notes will be
 Corporate governance and financial provided by
performance instructor
 What Problems does corporate governance
try to solve?
 Mechanism for mitigating agency problem:
Shareholder-Manager conflict
o Institutional investors
o Compensation contracts
Qualitative analysis of a company

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Analysis of Financial Statements BSAF-VII, Course Outline Fall-2021.
6  How to read the annual report of a company Annual report of
 What to look for in an annual report? a company will
 Financial highlights be discussed
 The management statement
 Management Discussion and Analysis
 Corporate information
 Directors’ Report
 Analysis of Corporate governance
 Auditor’s report
 Industry analysis
 Impact of news and other macroeconomic
factors
7 Quantitative analysis of a company 1. Note: Harvard Notes on ratio
 The financial Ratio Analysis Business Publisher: analysis will be
Profitability: The
 Profitability ratios: The higher the better provided by
higher the better
 Leverage ratios: The balancing Act instructor
 Liquidity ratios: Can we pay our bills? 2. Note: Harvard
 Business Publisher:
Leverage: The
balancing Act

3. Note: Harvard
Business Publisher:
Liquidity: Can we
pay our bills?
8 Quantitative analysis of a company
 Valuation ratios 1. Note: Harvard
Business Publisher:
 Operating ratios
Making the most of
 Efficiency ratios: Making the most of your your assets
assets
 Prepare Forecasted Financial Statements 2. Note: Introduction to
and Valuation of the Firm Valuation
 Equity research
 Stock price and Business fundamentals
Investor’s analysis
9  Leverage and its effects on Earnings Chapter-09
 EPS Case Study: Drivers Reference Book
 P/E Ratio of Industry Financial by: Charles H.
 Dividend Payout Structure Gibson, South
 Dividend Yield Western Cengage
 B/V Per share
 Stock Options (Stock Based Compensation) SIMULATION:
 Restricted Stock Financial Detectives
 Stock Appreciation Right

MID TERM --EXAM

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Analysis of Financial Statements BSAF-VII, Course Outline Fall-2021.
11 Accounting flexibility in the income statement Part-4 Chapter-14
 Accounting regulation and flexibility (See recommended
 Accounting flexibility and economic book)
consequences
 Accounting issues in valuation
 Accounting is credit analysis
 Accounting issues in executive
compensation

Accounting flexibility in the Balance sheet

12  Assets, liabilities and related expenses Part-4 Chapter-15
 Accounting regulation and flexibility (See recommended
 Accounting flexibility and economic book)
consequences
 Accounting issues in valuation
 Accounting is credit analysis
Accounting issues in executive
compensation

Accounting quality
13 Part-4 Chapter-13
 The purpose of financial statement analysis (See recommended
and good accounting quality book)
 Assessment of accounting quality
 Total assessment of accounting quality

PROJECT-PRESENTATION
14
FINAL EXAM

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Analysis of Financial Statements BSAF-VII, Course Outline Fall-2021.