Financial Statement Analysis

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset, Financial ratios / Pages: 13 (766 words) / Published: Mar 13th, 2015
Financial Statement Analysis
Chandra Sekhar Mishra
VGSOM, IIT Kharagpur

Outline
Financial Statements and their Content
●Why Financial Statement Analysis (FSA)?
●Tools for FSA


Financial Statements


Balance Sheet



Statement of financial position
Statement of Assets and Liabilities






Income Statement


Statement of financial performance




Assets: What a business owns
Liabilities: What a business owes to non-owners
Equities: What a business owes to owners

Revenues and Expenses

Cash flow Statement


Statement cash inflows and cash outflows


Operating, Investing and Financing

Balance Sheet - Assets


Major Types of Assets




Fixed Assets
Investments
Current Assets









Cash and cash equivalents
Marketable securities
Receivables
Inventory
Loans and advances
Other current assets

Intangible Assets

Balance Sheet - Liabilities
Current Liabilities and Provisions








Creditors
Accounts/ Notes payable
Accrued liabilities
Income Tax payable

Debt/ Loan






Short term and long term
Secured and unsecured

Debentures and bonds
●Preference share capital
●Equity Capital





Paid-up capital
Reserves and surplus

Income Statement


Income





Expenses







Sales
Other income
Operating expenses
Financial expenses
Tax provision
Net profit

Appropriation of net profit



Transfer to reserves
Distribution of profit as dividend

Cash Flow Statement


Cash flow from operating activities




Cash flow from investment activities




The profit adjusted for depreciation, gains and/or losses on sale of non-current assets, tax paid, and working capital changes.
Purchases of non-current assets and proceeds on the sale of non-current assets

Cash flow from financing activities


Proceeds on the issue of equity/preference shares and loans/debentures and the redemption of redeemable preference shares and loan/debentures

Sources of Financial Information
Annual Reports of Companies
●Secondary databases/



References: Reilly and Brown (2006), Investment Analysis and Portfolio Management, 8e, Thomson (Cengage) Learning, New Delhi ●Bodie et al (2009), Investments, 8e, Tata McGraw Hill, New Delhi ●Prasanna Chandra (2008), Investment Analysis and Portfolio Management, 3e, Tata McGraw Hill, New Delhi ●Ramachandran and Kakani (2008), Financial Accounting for Management, 2e, Tata McGraw Hill, New Delhi ●Narayanaswamy (2012), Financial Accounting: A

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