Financial Statement Analysis
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/
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