Generic Elective- 3.4(GE-3.
4): Financial Statement Analysis
CREDIT DISTRIBUTION, ELIGIBILITY AND PRE-REQUISITES OF THE
COURSE
Course Credits Credit distribution of the course Eligibility Pre-
title & criteria requisite of
Code Lecture Tutorial Practical/ the course
(if any)
Practice
GE 3.4 – 4 3 1 0 Pass in NIL
Financial XII
Statement
Analysis
Learning Objectives
The course aims to enable the student to analyse and interpret the financial
statements and related footnotes of publicly traded companies.
Learning outcomes
After completion of the course, learners will be able to:
1. Describe the meaning of financial statements as per Companies
Act, 2013. 2. Discuss the techniques of financial statements analysis.
3. Compute the financial ratios using spreadsheets.
4. Examine the cash position of companies using the cash flow
statements. 5. Analyse the financial performance of companies
using ratio analysis.
SYLLABUS OF GE-3.4
Unit 1: Introduction (9 hours)
Introduction to financial statements ,Uses & Limitations of Financial Statements, users
of accounting information, an overview of Financial statements as per companies
act,2013, Balance sheet, Statement of Profit and Loss, Cash Flow statement,
Statement of changes in Equity, Notes to the accounts, Significant accounting
policies,. Brief introduction of accounting standards.
Unit 2: Techniques of financial statements analysis (9 hours)
Comparative and common-size statements: horizontal and vertical analysis,
trend analysis.
Unit 3: Ratio analysis (9 hours)
Ratio analysis and interpretation: liquidity, solvency, profitability, activity and
market ratios; Du Pont analysis.
Unit 4: Cash Flow Analysis (9 hours)
28
Importance and objective of understanding a firm's cash flows, Structure of Cash
flow statement: Financing, investing and operating activities, Preparation of Cash
Flow statement as per AS 3 (revised) and Ind AS 7.
Unit 5: Financial Statement analysis – Real-life case work (9 hours)
Analysis of financial statements (Income Statement, Balance sheet, Cash flow
statement) of any two listed companies of similar market capitalization from the same
sector/industry using spreadsheets. Use Ratio analysis and Industry averages to draw
inferences about the company’s financial health.
Exercises:
The learners are required to:
1. Download soft copies of annual reports of public listed companies & analyse
the financial statements.
2. Prepare the comparative & common size financial statements for three years of
at least two listed companies.
3. Compute accounting ratios to analyse the operating efficiency, solvency,
profitability and liquidity position of any company from its financial statements.
4. Analyse & interpret the cash position of companies using the cash flow
statements. 5. Analysis & interpret the financial ratios of select companies on the
basis of their financial statements.
Note: Students should be encouraged to use spreadsheets for practical
exercises. Suggested Readings:
● Gupta, A. (2018). Financial Accounting for Management - An Analytical
Perspective. Delhi: Pearson Education.
● Lal, J., & Gauba, S. (2018). Financial Reporting and Analysis. Delhi:
Himalaya Publishing House.
● Myer, J. N. (1965). Financial Statement Analysis. USA: Prentice-Hall.
● Penman, S.H. (2013). Financial Statement Analysis. Singapore: Tata McGraw
Hill.
● Subramanyam, K. R., & Wild, J. J. (2014). Financial Accounting – A
Managerial Perspective. Delhi: Prentice Hall of India.
● Tulsian, P. C., Tulsian, B., & Tulsian, T. (2022). Analysis of Financial Statements.
New Delhi/NCR: Tcom Prints.
● Tulsian, P. C., Tulsian, B., & Tulsian, T. (2022). Corporate Accounting. New
Delhi: S. Chand Publication.
● Tulsian, P. C., Tulsian, B., & Tulsian, T. (2022). Financial Management. New
Delhi: S. Chand Publication.
Note: Suggested readings will be updated by the Department of Commerce and
uploaded on Department’s website.
Note: Examination scheme and mode shall be as prescribed by the Examination
Branch, University of Delhi, from time to time.
29
