INSTITUTE OF BUSINESS AND MANAGEMENT SCIENCES
KPK AGRICULTURAL UNIVERSITY PESHWAR
Programme
Course Name
Course Code
Credit Hours
Total Week
Total Hours
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:
:
:
:
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MBA–Finance Elective Course
Financial Statement Analysis
MBA-778
03
16
48
Course Objectives
This course has many objectives. A few key objectives are as follows:
1) Encourage you 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) Increase your understanding of the use of financial statement analysis in realistic scenarios.
Course Layout:
Common reasons for performing financial statement analysis include valuing new and ongoing
businesses, extending credit, assessing performance or possible risk, and estimating future performance.
This course provides an overview of the use of financial statement analysis process through the following
five steps:
a) Analyzing the industry and economic environment in which the firm operates.
b) Analyzing the strategies that a company pursues.
c) Analyzing and understanding the financial statements of the firm.
d) Assess the profitability and risk of the firm.
e) Estimating the value of the firm.
Week 1:
Overview of Financial Statement Analysis
Introduction to Business Analysis
Week 2:
Types of Business Analysis
Credit Analysis
Equity Analysis
Other uses of Business Analysis
Components of Business Analysis
Business Environment and Strategy Analysis
Accounting Analysis
Financial Analysis
Prospective Analysis
Week 3:
Week 4:
Financial Statements—Basis of Analysis
Business Activities
Planning Activities
Financing Activities
Investing Activities
Operating Activities
Week 5:
Financial Statements Reflect Business Activities
 Balance Sheet
 Income Statement
 Statement of Shareholders’ Equity
 Statement of Cash Flows
Additional Information
Week 6:
Financial Statement Analysis Preview
Analysis Tools
 Comparative Financial Statement Analysis
 Common-Size Financial Statement Analysis
 Ratio analysis
 Cash Flow Analysis
 Valuation Models
Week 7:
Financial Reporting and Analysis
Reporting Environment
Statutory Financial Reports (Key SEC Filings)
 Form 10-K
 Form 10-Q
 Form 20-F
 Form 8-K
 Regulation 14-A
Factors Affecting Statutory Financial Reports
 Generally Accepted Accounting Principles (GAAP)
 Managers
 Monitoring and Enforcement Mechanisms
 Corporate Governance
 Alternative Information Sources
Week 8:
Nature and Purpose of Financial Accounting
Desirable Qualities of Accounting Information
Important Principles of Accounting
Relevance and Limitations of Accounting
Week 9:
Introduction to Accounting Analysis
Need for Accounting Analysis
Process of Accounting Analysis
 Evaluating Earnings Quality
 Adjusting Financial Statements
Week 10:
Analyzing Financing Activities
Liabilities
Current Liabilities
Noncurrent Liabilities
Analyzing Liabilities
Week 11:
Leases
Accounting and Reporting for Leases
Analyzing Leases
Restating Financial Statements for Lease Reclassification
Off-Balance-Sheet Financing
Off-Balance-Sheet Examples
Week 12
Shareholders' Equity
Capital Stock
Retained Earnings
Book Value per Share
Liabilities at the “Edge” of Equity
Week 13:
Prospective Analysis
The Projection Process
Projecting Financial Statements
Week 14:
Application of Prospective Analysis in the Residual Income Valuation Model
Trends in Value Drivers
Week 15:
Risk Analysis
Types of Risk
 Short-term liquidity
 Long-term solvency
 Credit risk
 Bankruptcy risk
 Financial reporting manipulation risk
Week 16:
Framework for Risk Analysis
Bankruptcy Prediction
 Investment Factors
 Financing Factors
 Operating Factors
 Other factors
Market Equity Beta Risk
Manipulation Risk
Reference Books:
1.
Financial Statement Analysis - Subramanyam, K. R.; Wild, John (10th Edition) McGraw-Hill
Higher Education Publishers
2.
Financial Reporting, Financial Statement Analysis, and Valuation:A Strategic Perspective - Stickney, Brown, and Wahlen (Sixth Edition)