ACC306:FINANCIAL STATEMENT ANALYSIS

L:3 T:1 P:0 Credits:4

Course Outcomes: Through this course students should be able to

CO1 :: employ the profitability and leverage analysis to examine the financial position of the firm

CO2 :: use projection process to forecast financial position and performance of business
enterprise

CO3 :: apply cash flow reporting analysis to interpret the cash position of the firm

CO4 :: analyze statement of changes in equity, balance sheet and income statement

CO5 :: evaluate the receivable management policies of the organization

Unit I
Overview of financial statements : importance and stakeholders of financial statements, balance
sheet and income statement, statement of changes in equity, comprehensive income, income from
continued operations and discontinued operations
Unit II
Profitability analysis : pretax margin, cash flow margin, price to sales ratio, return on invested
capital, dividend payout ratio, price earning ratio and diluted eps, dividend yield ratio
Unit III
Leverage analysis : types and importance of leverages, financial leverage ratios, degrees of
operating and financial leverages, combined leverage, indifference point
Unit IV
Receivables management analysis : optimum credit policy- a cost-benefit analysis, credit policy
variables- credit standards and analysis, credit terms, collection policy and procedures, credit
evaluation of individual accounts- credit information, credit investigation, credit limits and collection
procedures
Unit V
Prospective analysis : projection process, process of projecting income statement, balance sheet,
sensitivity analysis, an overview of forecasting tools and techniques- moving average and arima
models
Unit VI
Corporate reporting : annual report of a company and statutory financial reports, factors affecting
statutory financial reports, monitoring and enforcement mechanisms, statement of cash flows,
limitations in cash flow reporting, free cash flow, cash flow adequacy ratio, cash reinvestment ratio

Text Books:
1. FINANCIAL MANAGEMENT by I.M. PANDEY, VIKAS PUBLISHING HOUSE

References:
1. FINANCIAL MANAGEMENT by MAHESHWARI S.N, SULTAN CHAND & SONS (P) LTD.

2. FINANCIAL STATEMENT ANALYSIS by K. R. SUBRAMANYAM, MC GRAW HILL

3. FINANCIAL MANAGEMENT by KHAN & JAIN, MC GRAW HILL

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