MBAFN1

FINANCE SPECIALIZATION

ANALYSIS OF FINANCIAL STATEMENTS

SCHOOL OF BUSINESS MANAGEMENT

COURSE OUTLINE

Published by
Noida International University
Greater Noida, Uttar Pradesh 201308
India
http://www.niu.edu.in
© Noida International University, 2017
Copyrighted materials reproduced herein are used under the provisions of the Copyright Act 1957 as
amended by the Copyright Amendment Act 2012, or as a result of application to the copyright owner.

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COURSE INTRODUCTION
Welcome to Analysis of Financial Statements – MBAFN1
Financial statement information is the basis for a wide range of business decisions. Managers use
financial statements to monitor their firm's performance relative to competitors, to communicate with
external investors, to help judge what financial policies they should pursue, and to evaluate potential
new businesses to acquire. Securities analysts use financial statements to rate and value companies they
recommend to clients. Bankers use financial statements to decide whether to extend a loan to a client
and to determine the loan's terms. Investment bankers use them to provide a basis for valuation and
analysis of prospective buyouts, mergers and acquisitions, and consultants use them as a basis for
competitive analysis for their clients.

Course Director
Dr (Mrs) HS Rathore

COURSE OVERVIEW
Financial Analysis is an integral part of overall financial analysis carried out by various business
organizations in India and all around the world. It depicts the financial health of any company and helps
the companies to augment their financial resources and management of generated funds efficiently. It
compels the business firms to remain judicious in fund allocation to different activities and sub activities
and use the generated funds carefully. Financial analysis guides the companies about their future course
of action and the direction that any particular company should move on.

COURSE OBJECTIVES
This course has many objectives. A few key objectives are as follows:

1. Encourage to think in a new and more creative way when analyzing or forecasting financial
information.
2. Introduce new tools common to financial statement analysis and how to use them in practical
applications.
3. Understand how financial statement information can help solve business problems.
4. Increase your ability to read and understand financial statements and related information.
5. Practice communicating decisions/ideas both through oral and written communication.

LESSON PLAN
Session Topics to be covered No. of Module Pedagogy
No lectures Objective
MODULE I
FINANCIAL STATEMENT ANALYSIS 6
1 Introduction, objectives, parties interested, 1 To Select an
industry
etc. understand
and apply
2 Cross section analysis 1 the tools and tools and
techniques
3 Time series 1 techniques of
of analysis
4 Comparative Financial Statements 1 analysis on various
companies
5 Trend Analysis 1
6 Common Size Statement Analysis 1
MODULE II 4
CASH FLOW ANALYSIS
7 Measuring and analysing operating cash 1 To learn how Exercise on
cash flow
flows to analyse
analysis
8 Measuring and analysing financing cash 1 cash flow
flows statements
9 Measuring and analysing investing cash 1
flows
10 Cash flows and financial flexibility 1
MODULE III 6
ANALYSIS AND INTERPRETATION To learn
OF RATIOS which ratio
will be useful
for what
analysis and
how to
 interpret the
analysis

11 Operational efficiency ratios 1 Select an

industry
12 Liquidity ratios 1
and
13 Profitability ratios 1 perform
ratio
14 Valuation Ratios 1 analysis on
15 Capitalization ratios 1 different
companies
16 Company analysis on the basis of above 1 and
mentioned rations interpret
the result
MODULE IV 4 To
understand
the process of
usefulness of
security
valuation
SECURITY VALUATION
17 Valuation of Equity shares 1
Exercise on
18 Preference shares 1
valuation of
19 Valuation of Debentures 1 different
securities
20 Numericals on Security valuation 1

Marks Evaluation Package

5 Assignement
5 Project Presesntation
5 Class-Test
5 Attendance
20 Mid-Term
60 End-Term
100 Total

LEARNING OUTCOMES
Upon successful completion of the course, a student will be able to:
 1. Evaluate firm profitability using measures of firm performance - net income - as well as
profitability analysis techniques including per share analysis, common-size analysis,
percentage change analysis, and alternative measures of income.

2. Compare the profitability of firms using the rate of return on assets and its components: profit
margin and total assets turnover.
3. Evaluate short-term liquidity risk, long-term solvency risk, credit risk and bankruptcy risk,
systematic risk.
4. Develop financial statement forecasts including balance sheets, income statements, and
statement of cash flows.
5. Determine the impact of the following factors on market multiples, (a) risk and the cost of
equity capital, (b) growth, (c) differences between current and expected future earnings, and
(d) alternative accounting methods and principles.

LEARNING RESOURCES

1. Financial Statement Analysis and Security valuation by Stephen H. Penman (Boston, Mass.:
McGraw-Hill, 2007) third edition [ISBN 0071254323]
2. Business Analysis and Valuation by Krishna G. Palepu, Paul M. Healy and Victor L. Bernard
(Mason, Ohio: Thomson South-Western, 2004) third edition [ISBN 0-324- 11952-6]
3. Narayanaswamy R,2005, 2nd Edition,Finanacial Accounting – A Managerial Perspective,PHI
(Prentice Hall of India.)
4. Maheshwari S N and S K Maheshwari, 2006, Accounting for Management, Vikas Publishing
House Pvt. Ltd. Bodie, Kane, Marcus &Mohanti - Investment and Indian Perspective (TMH,
6th Ed.).

EXPECTATIONS
In this section, we will briefly outline a few things that we expect from you and that you can expect
from us. We have done our best to provide a good set of materials for this course but we cannot ensure
that you will pass the course unless you devote the necessary time and effort in studying the material.
What you can expect from the course
Availability for student enquiries by email, phone or personally during the day.
Feedback on assignment tasks and, where necessary, an assignment solution that explains the reasons
for the mark awarded.
Assignment turn-around times of approximately 2-3 weeks.
The course director will usually provide additional materials such as lecture notes etc. but these are
extra resources that lie outside of the standard chapters you are required to read.
What we expect from you
Approximately 7 hours of study time each week.
A scholarly approach to the preparation of assignment work.
Issues or problems will be brought to the attention of the course director in a timely manner.
Up to date contact details (make sure your email address and contact number that you hold is accurate).
The style of the study modules
The study modules have been written to guide you through the text book and, where necessary, provide
additional explanation. The best way to use the study modules is as follows:
Read the appropriate pedagogy of the study module: this provides a brief introduction to each piece of
material and directs you to read a particular section of the text.
Read the designated text book section.
How do you know if you have met the objective(s)? The chapter mentioned in the session plan has
concept check questions at the end. If you can quickly answer these you are on track.
Once you have completed the reading, confirm that you have met the objectives of the module by
successfully completing answering the concept review questions at the end of chapters.

JOB PROSPECTS
A solid understanding of analysing financial statements usually lands you a sweet job as an accountant
and opens doors for a number of career paths. You can get a job as Accountants and Financial Analysts.
Later you can be an Investment Banker and Financial Controller as well.