RUTGERS BUSINESS SCHOOL
DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEMS
Office: JLH 243 A
Professor: Bharat Sarath
Email: bsarath@andromeda.rutgers.edu
Phone: 646 312 3170
Office Hours Monday 10:30 – 11:30
Wednesday 2:00 – 3:30
Departmental Mission:
The missions of the AIS Department are (1) to operate the undergraduate, master's, and doctoral programs in
accountancy, (2) to provide accounting knowledge to students both to students who wish to become professional
accountants and to business students with majors in areas other than accounting, and (3) to serve its student, academic,
and business constituencies through engagement in high quality research. These academic programs focus on the
development, measurement, analysis, validation and communication of financial and other information. Much of the
emphasis is directed to enhancing the student’s ability to understand the business and regulatory environment and to
alert students to the broad implications of accounting decisions. In addition to developing an understanding of theory
and the skills necessary for the successful careers in accounting, students should be prepared to build upon this
knowledge to advance to positions of higher responsibility. The overall goal is to continue the tradition of accountancy
at Rutgers both in the external auditing context and as managerial accountants who help to create and run successful
businesses.
Course Objectives:
Consistent with the department’s mission, the Financial Statement Analysis class aims to develop the skills that will
help to read and understand the nuances of financial disclosures made under the general rubric of GAAP. The
accounting numbers generated for financial reporting purposes and for reporting to the SEC vary from transparent to
completely opaque. Financial statements prepared in accordance with GAAP are rife with conventions that, though
“generally accepted,” are not particularly meaningful for a non-accountant. So a student or professional who expects to
rely on information parsed from financial disclosures has to develop a feel both for the way accounting rules are used
and occasionally, abused in the disclosures made by firms. At the end of this course, the student should:
1)
Be clear about the role played by mandated financial statements in financial markets
2)
Understand clearly that numbers reported in financial statements are based on judgment rather than
scientific measurements
3)
Be able to understand the overall structure and content of 10-K forms filed with the SEC
4)
Develop some understanding of how accounting rules and conventions may be deliberately used to
present misleading rather than informative reports
5)
A conceptual understanding of the relationship between financial statements and equity valuation
Course Materials:
Text:
Other Materials:
Financial Statement Analysis, 6th ed Stickney Brown and Wahlen, Cengage Publishers
Lecture notes to be downloaded from Blackboard. In addition, there will be several cases and
other materials handed out during the semester.
Course Assessment:
One midterms (25 pts).
Final exam (45 pts).
Group Projects (20 pts)
Attendance and
Class Participation (10 pts).
Midterm exams will be closed-book, in-class exam.
The final exam is not cumulative. It will also be a closed-book, in-class exam.
To be assigned through the semester
Students are expected to come to every class and be on time
(late arrivals and early departures are discouraged). Students are expected to study the
assigned material in advance of each class and participate in class discussions.
Discussions may involve both difficulties associated with the assigned material and
broader issues on how the assigned material relates to real-world business activities.
Examination and Grading Policies
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Make-up midterm examinations will be offered only for valid medical reasons.
The weights in the “Basis for Evaluation,” above, are identical for everyone. It is not possible to make up for
poor performance by doing extra work.
Any form of cheating will be reported to the Dean of Students and will result in failure in the course and
possible suspension from the College.
After the midterm, you have one week from the time your exam paper is returned to you to review the exam
for any errors in grading. The exams must be returned at the end of the week. All requests for regrading must
be submitted in writing.
General
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This will be a challenging course for many of you. It is important not to fall behind.
Please form your groups as quickly as possible. Groups should consist of four or five people. Groups of three
will be permitted if people drop out of the course. Groups of six will not be permitted.
Group assignments are to be typed and handed in on time.
Communication:
Blackboard will be the primary method of communication outside the classroom and office hours. To access
Blackboard you must have a web-browser. It is your responsibility to check the Blackboard site regularly.
Rules of Professional Conduct
Most students at business schools intend to follow professional careers. As part of that preparation, it is good to
develop a professional attitude towards your classes. Following is a list of general rules of conduct to be followed in
your AIS classes
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You are expected to participate in the class. Come prepared. Do not be worried about speaking up or
discussing ideas with people sitting next to you. However, you must be careful not to disturb the class through
your conduct.
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You are expected to come to every class, to arrive on time, and to stay through the entire class. If you miss a
class, it is your responsibility to find out what you may have missed from a fellow-student. You cannot expect
your professors to repeat the entire lecture because you failed to show up in class.

Please turn off your cell phones during class time. Any cell phone that rings in class will lead to automatic
penalties.
E-Mail Etiquette:
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You must include your full name and recitation section number on any e-mails and attachments that you send
to us. We will not reply to e-mails that lack this basic information.
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You must also write in the subject area a short description of your e-mail (e.g., ACC3200 question).
Otherwise, it is likely that your e-mail will be deleted without being opened.
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Do not use the e-mail list on Blackboard for any purpose unrelated to this course.
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E-mails in the course are a form of business communication. We expect you to compose e-mails with the
same attention to correct grammar and syntax, politeness and professional tone that apply to all forms of
business correspondence.
Academic Honesty
Baruch Students are expected to bear individual responsibility for their work and to uphold the ideals of academic
integrity. Cheating, forgery, plagiarism or other dishonest acts undermine the college’s educational mission and the
student’s personal intellectual growth. Any student who attempts to compromise the academic process will be
sanctioned.
Contemporary Topics
Students are encouraged to bring in newspaper articles or other contemporary materials that are pertinent to the course.
There will be several occasions during the course when the class discussion will concern topical issues related to the
broader goals of managerial accounting.
FSA Schedule, Rutgers Fall 2011
1
Date
Sept 07
Topic
Introduction – Markets, Auditing and
Financial Statements
Overview of Financial Statements
Revenue and Expense Recognition
2
3
Sept 08
Sept 12
4
Sept 14
5
6
Sept 19
Sept 21
7
Sept 26
8
Sept 28
9
Oct 03
Profitability Analysis and Risk
Analysis
10
Oct 05
11
Oct 10
12
13
14
Oct 12
Oct 17
Oct 19
15
16
17
18
19
20
Oct 24
Oct 26
Oct 31
Nov 02
Nov 07
Nov 09
21
22
Nov 14
Nov 16
23
23
Nov 21
Nov 28
25
Nov 30
Risk Analysis Use and Analysis of
Ratios
Common Size Statements;
Comparisons of Ratios
Equity Financing
Debt Financing
Off-Balance sheet Financing
Arrangements and Leases
Catch-up Class
Review for Midterm
Midterm
Revenue and Expense Recognition
Revenue and Expense Recognition
Earnings Quality and recasting
financial statements
Restructuring and Goodwill Impairment
Capital Leases, Accounting treatment
and Capitalizing operating leases
Investment in Long-Term Assets
Investment in Securities – Treatment of
Minority Passive Investments
Income Taxes
26
27
28
Dec 05
Dec 07
Dec 12
Dec 21
Projecting Financial Statements
Projecting Financial Statements
Review for Final
Final Exam
Asset and Liability Valuation and
Income measurement
Income Flow versus Cash Flows
Direct and Indirect cash flow
preparation from Balance sheet and
income Statement
Converting Indirect statement to direct
statement and analyzing Cash flow
statements
Profitability Analysis
Readings
Lecture Notes
Lecture Notes
Lecture Notes; Problems 7.9 and 7.10 page
486
Chapter 2; Problem 2-15
Chapter 3 Problems 3-9,10,11,12
Chapter 3, Problem 3.23
Amazon Case; Case 3.2 (page 174)
Chapter 4 – Profitability Analysis 4-10-4-13;
4-18;4-27.
Read Pages 346-374 (financial Ratios) Skip
374-392 (bankruptcy prediction models)
Read 393-399 (earnings Manipulation Risk)
Problem 5-14
Discussion of Millennial Technologies -case to be handed in on October 24
1-11, Exhibits 3-44,45,46 Problem 4-25 Al
Dunlap Case
Chapter 6 read to page 459
Chapter 6 read to page 478 P 6-6, 6-10
Chapter 6 Read to Page 484 P 6-17, 618
Millennial Technologies Due
Sample Exam
In Class
Chapter 8 to Page 452 Problem 8-19,
Chapter 8 to Page 452 problem 8-21
Chapter 9 Problem 9.9
Chapter 9 9-10,9-11
Lecture Notes -- Read to Page 495
Chapter 7 read to page 549
Chapter 7 Read to Page 560
Chapter 8 Pages 661-672 Capitalizing
Operating Lease Project Due
Chapter 10
Chapter 10
Sample Final Projecting Financials Due
12:00 – 2:30