Project Report on

Analysis of Financial Statement

Submitted by
MITHUN MOHANLAL SHAH
MASTERS IN COMMERCE SEM-III
(Advanced

Auditing)

ACADEMIC YEAR 2014-2015

Roll No. 6043

Submitted to
UNIVERSITY OF MUMBAI
MULUND COLLEGE OF COMMERCE
S.N ROAD, MULUND (W)-MUMBAI 400 080

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DECLARATION

I, MITHUN MOHANLAL SHAH. the student of MULUND COLLEGE OF COMMERCE,

S.N Road, Mulund (W), Mumbai 400 080, studying in M.Com part-II (Advanced Auditing )
here by declaring that I have completed

this project

ANALYSIS OF FINANCIAL

STATEMENT during the academic year 2014-15. The information submitted is true and
original of best of my knowledge.

Date:

Signature:

Place: MUMBAI

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CERTIFICATE

I, Prof. Mr. Nikhil Karkhanis, here by certify that MITHUN MOHANLAL SHAH

of

MULUND COLLEGE OF COMMERCE, S.N Road, Mulund (W), Mumbai 400 080, studying
in M.Com part-I (ADVANCE AUDITING) here by declaring that I have completed this project
ANALYSIS OF FIANANCIAL STATEMENT during the academic year 2014-15. The
information submitted is true and original of best of my knowledge.

Signature: (Project Guide)

Signature (Principal)

Signature: (Co-Ordinator)

Signature: (External Examiner)

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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to Principal of Mulund College of Commerce

DR. (Mrs.) Parvathi Venkatesh, Project guide Mr. Nikhil Karkhanis, for providing me an
opportunity to do my project work on ANALYSIS OF FIANANCIAL STATEMENT. I
also wish to express my sincere gratitude to the non - teaching staff of our college. I
sincerely thank to all of them in helping me to carrying out this project work. Last but
not the least, I wish to avail myself of this opportunity, to express a sense of gratitude
and love to my friends and my beloved parents for their mutual support, strength, help
and for everything.

Date:

Name: MITHUN MOHANLAL SHAH.

Reg. No:

Signature:

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INDEX
Sr. No.
1

TITLE
CHAPTER 1
Auditing
Introduction of Auditing
Objectives of Auditing
Limitations of Auditing

23
24
27

28
29

30

CHAPTER 5
Summary
Summary
Conclusion
References

21

CHAPTER 4
Analysis and Interpretation of Data
Analysis and Interpretation of Data
Learning Objectives
Overview

12
15

CHAPTER 3
Research Methodolgy
Research Methodolgy
Research Findings
Review of Literature

6
8
10

CHAPTER 2
Analysis of Financial Statement
Analysis of Financial Statement
Financial Statement are Indicators of the Two
Significant Factors
Comparative Statement Analysis

Page No

APPENDIX
Webliography

31
32
33

34

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CHAPTER 1

INTRODUCTION OF AUDITING

Economic decisions in every society must be based upon the information available at the
time the decision is made. For example, the decision of a bank to make a loan to a business is
based upon previous financial relationships with that business, the financial condition of the
company as reflected by its financial statements and other factors. If decisions are to be
consistent with the intention of the decision makers, the information used in the decision process
must be reliable. Unreliable information can cause inefficient use of resources to the detriment of
the society and to the decision makers themselves. In the lending decision example, assume that
the barfly makes the loan on the basis of misleading financial statements and the borrower
Company is ultimately unable to repay. As a result the bank has lost both the principal and the
interest. In addition, another company that could have used the funds effectively was deprived of
the money. As society become more complex, there is an increased likelihood that unreliable
information will be provided to decision makers. There are several reasons for this: remoteness
of information, voluminous data and the existence of complex exchange transactions 3 As a
means of overcoming the problem of unreliable information, the decision-maker must develop a
method of assuring him that the information is sufficiently reliable for these decisions. In doing
this he must weigh the cost of obtaining more reliable information against the expected benefits.

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A common way to obtain such reliable information is to have some type of verification
(audit) performed by independent persons. The audited information is then used in the decision
making process on the assumption that it is reasonably complete, accurate and unbiased.

Definition:
Is an audit carried out by a tax collecting agency in order to determine if a taxpayer paid
the correct amount of tax. Taxpayers are chosen for audits if they have suspiciously high claims
for deductions or credits, or if their reported income is suspiciously low, but an audit may be
done simply as part of a random sampling. If the auditor finds a tax deficiency, the taxpayer has
to pay back-taxes, as well as interest and penalties.

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OBJECTIVES OF AUDITING

There are two main objectives of auditing. The primary objective and the secondary or incidental
objective.
Primary objective as per Section 227 of the Companies Act 1956, the primary duty
(objective) of the auditor is to report to the owners whether the balance sheet gives a true
and fair view of the Companys state of affairs and the profit and loss A/c gives a correct
figure of profit of loss for the financial year.
Secondary objective it is also called the incidental objective as it is incidental to
the satisfaction of the main objective. The incidental objective of auditing are:
Detection and prevention of Frauds
Detection and prevention of Errors.
Detection of material frauds and errors as an incidental objective of independent financial
auditing flows from the main objective of determining whether or not the financial statements
give a true and fair view. As the Statement on auditing Practices issued by the Institute of
Chartered Accountants of India states, an auditor should bear in mind the possibility of the
existence of frauds or errors in the accounts under audit since they may cause the financial
position to be mis-stated. Fraud refers to intentional misrepresentation of financial information
with the intention to deceive.

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Frauds can take place in the form of manipulation of accounts, misappropriation of cash and
misappropriation of goods. It is of great importance for the auditor to detect any frauds, and
prevent their recurrence. Errors refer to unintentional mistake in the financial information arising
on account of ignorance of accounting principles i.e. principle errors, or error arising out of
negligence of accounting staff i.e. Clerical errors

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LIMITATIONS OF AUDITING
1. Non-detection of errors/frauds:- Auditor may not be able to detect certain frauds which are
committed with malafide intentions.
2. Dependence on explanation by others:- Auditor has to depend on the explanation and
information given by the responsible officers of the company. Audit report is affected adversely
if the explanation and information prove to be false.
3. Dependence on opinions of others:- Auditor has to rely on the views or opinions given by
different experts viz Lawyers, Solicitors, Engineers, Architects etc. he can not be an expert in all
the fields
4. Conflict with others: - Auditor may have differences of opinion with the accountants,
management, engineers etc. In such a case personal judgement plays an important role. It differs
from person to person.
5. Effect of inflation: - Financial statements may not disclose true picture even after audit due to
inflationary trends.
6. Corrupt practices to influence the auditors:- The management may use corrupt practices to
influence the auditors and get a favorable report about the state of affairs of the organization.
7. No assurance:- Auditor cannot give any assurance about future profitability and prospects of
the company.

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8. Inherent limitations of the financial statements :- Financial statements do not reflect current
values of the assets and liabilities. Many items are based on personal judgement of the owners.
Certain non-monetary facts cannot be measured. Audited statements due to these limitations
cannot exhibit true position.
9. Detailed checking not possible :- Auditor cannot check each and every transaction. He may
be required to do test checking.

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CHAPTER 2

ANALYSIS OF FINANCIAL STATEMENT

The accounting process begins with the recording of transactions in the books of primary
entry. The accounting information resulting from the transactions so recorded gets posted in to
various accounting heads in the ledger. In the ledger each account is balanced at the end of an
accounting period and a summary of all balances in the various accounting heads from the ledger
is prepared which is known as trial balance from such trial balances and after effecting certain
adjustments considered necessary (which is dependent on the particular accounting system
followed by the organizations) the financial statements relating to the accounting period are
prepared

FINANCIAL STATEMENT ANALYSIS

Financial statement is an organized collection of data according to logical and consisted
accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business form. It may reveal a series of activities over a given period of time, as in the case of an
income statement.
The focus of the financial analysis is on key figures in the financial statements and the
significant relationships the exists between them. The analysis of financial statements is a
process of evaluating relationships between component parts of financial statements to obtain a
better understanding of the firms position and performance.

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Financial Analysis:
Financial analysis is the process of identifying the financial strengths and weakness of the
firm by property establishing relationships between the item of the balance sheet and the profit
and loss account. Financial analysis can be undertaken by management of the firm, or by parts
outside the firm.

USERS OF FINANCIAL ANALYSIS:

Management

Trade creditors

Investors

Government

Others

Management:
Management of the firm would be interested in every aspect of the financial analysis. It is
their overall responsibility to see that the resources of the firm are used most effectively and
efficiently and that the firms condition is sound.

Trade Creditors:

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The trade creditors are to be paid in a short term solvency of the concern. The current
ratio and acid test ratio will enable the creditors to assets the short term solvency position of the
concern.

Investors:
The Investors are interested their money in the firms shares, are not concerned about the
firms earnings. They restore more confidence in those firms that show steady growth in earnings.
As such, they concentrate on the analysis of the firms present and future profitability. They are
also interested in the firms financial structure to the extent it influences the firms earning ability
and risk.

Government:
The financial statements are used to asses tax liability of business enterprise. These
statements enable the government to find out whether the business is following various
regulations or not.

Others:
Trade associations, stock exchange and public at may also analyze the financial
statements to judge the financial position of different concerns.

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Definition
According to Myres Financial statement analysis is largely is a study of the Relationship
among the various financial factors in a business as disclose by a single set of statement and a
study of the trend of these factors as show in a series of statements.

FINANCIAL STATEMENTS ARE INDICATORS OF THE

TWO SIGNIFICANT FACTORS

1. Profitability
2. Financial Soundness
Analysis and interpretation of financial statements therefore refers to such a treatment of
the information contained in the income statement and the balance sheet so as to afford full
diagnosis of the profitability and financial soundness of the business.

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The term analysis means methodical classification of the data given in the financial
statements. The term interpretation means explaining the meaning and significance of the
data so simplified.
Types of financial Analysis
Financial analysis can be classified in to different categories depending upon.
(a)

The material used

(b)

The modus operand of analysis

On the basis of materials used. According to this basis financial analysis can be of two types.

a) External Analysis
Those who are outsider for the business do this analysis. The outsiders include investors,
credit agencies. government agencies and other creditors who have no access to the internal
records of the company. These persons mainly depends upon, the published financial statements.
Their analysis serves only a limited purpose. The position of this analysis has improved in recent
times on account of increased governmental control over companies and governmental
regulations regulations requiring more detailed disclosures of information by the companies in
their financial statements.

b) Internal analysis:
This analysis is done by persons who have access to the books of account and other
information to the books of accounts related to the business., Executives and employees of the
organization or by officers appointed for this purpose by the government or the court under
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powers vested in them can therefore do such an analysis. The analysis in done depending upon
the objective to be active depending upon the objective to be achieved through this analysis.
On the basis of modus operandi according to this, financial analysis can also be two
types.

a) Horizontal Analysis
In case of this type of analysis financial statements for a number of years are reviewed
and analyzed. The current years figures are compared with the standard or base year. The
analysis statement usually contains figures for too or more years and the changes are shown
regarding each item from the base year usually in the form of percentages. such as analysis given
the management considerable insight into levels and areas of strength and weakness. Since this
type of analysis is based on the date from year to year rather than on one date, it is also termed as
Dynamic Analysis?

b) Vertical Analysis:
In case of this type of analysis a study is made of the quantitative relationship of the
various items in the financial statements on a particular type, such an analysis is useful in
comparing the performance of servral companies in the same group, or divisions or departments
in the same company. Since this analysis depends on the data for one period, is nor very
conductive financial position. It is also called Static Analysis as it frequently used to ratios
developed on one date or for one accounting period. Tools or Techniques used for Analysis:
1. Ratio Analysis
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2. Method of least Squares (Trend Values)

3. Comparative statement Analysis.
These are explained in bring as follows.

1. Ratio Analysis:
Ratio Analysis is widely used tool of financial analysis. It is defined as the systematic use of
ratio to interpret the financial statements so that the strength and weakness of a firm as well as its
historical performance and current financial condition can be determined. The term ratio refers to
the numerical or quantitative relationship between two items/ Variable. This relation can be
expressed as.
a. Percentages
b. Fractions
c. Proportion of numbers.

Accounting ratios showed the relationship in mathematical terms between two

interrelated accounting figures. This is the most important tool available to financial analysis for
their work.
Ratio analysis is a process of identifying the financial strengths and weakness of the firm.
This may be accomplished either through a trend analysis of the firms ratios over a period of
time or through a comparison of the firms ratios with its nearest competitors and with the

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industry averages. The four most important financial dimensions which a firm would like to
analyze are: liquidity, Leverage, Activity and Profitability.

Nature of Ratio Analysis:

A Financial ratio is a relationship between tow accounting numbers. ratios help to make a
qualitative judgment about the firms financial performance.

Financial Ratio:
Financial Ratio is a relationship between two financial variables. It helps to ascertain the
financial condition of a firm.

Types of financial Ratios:

Liquidity ratios
Leverages ratios
Activity ratios
Profitability ratios

Liquidity Ratio:
Liquidity Ratio measure the firms ability to meet current obligations, and are calculated
by establishing relationships between current assets and current liabilities.
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Leverage ratio:
Leverage ratios measures the proportion of outsiders capital in financing the firms
assets, and is calculated by establishing relationships between borrowed capital and equity
capital.

Activity Ratio:
Activity ratio reflects the firms efficiency in utilizing its assets in generating sales and is
calculated by establishing relationships between sales and assets.

Profitability Ratio:
Profitability ratios measure the overall performance of the firm by deterring the
effectiveness of the firm ingenerating profit, and are calculated by establishing relationships
between profit figures on the one hard, and sales and assets on the other.

Utility of Ratio Analysis

Assessment of the firms financial conditions and capabilities.
Diagnosis of the firs problems, weakness and strengths.
Credit analysis
Comparative analysis
Time series analysis

Cautions in using ratio analysis

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 Standards of comparisons
Company differences
Prices level
Different definition
Changing situations

Past data

Standard of Comparison:
Time series analysis
Inter-firm analysis
Industry analysis
Preformed financial statement analysis

Advantages of Ratio Analysis:

1. It helps in analysis of the situation i.e. analysis on the financial situation and performance.
2. Inter-firm and Inra-firm comparison is both possible on the basis of accounting ratio
3. Accounting Ratio not only indicates the present position but they also indicate the cause
leading up to the position of a large extent
4. It helps in obtaining best result when ratios for a number of years are put in tabular form so
that the figure for one year can be easily compoared with those of other year
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5. It indicates the trend of the change, which helps in preparation of estimates for the future.
6. They provide simplicity to the complex accounting information presented by the financial
statements
7. They are very helpful to outsiders as well as for internal management
8. It is very helpful to internal managements, discharge of the basic managerial functions.
9. It also helps in planning, policy making & controlling the activities.
10. They are helpful in establishing the standard casting system.

COMPARATIVE STATEMENT ANALYSIS

Comparative statement is those statements, which have designed in a way, so as to
provide time perspective to the consideration of the various elements of financial position
embodied in such statements. In such statements figures for two or more periods are placed side
by side to facilitate comparison. The two statements are proposed for comparison. They are
comparative income statement and comparative Balance Sheet.
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SIGNIFICANCE OF THE STUDY:

Every company must consider their liquidity position, profitability and solvency position

and also the main attention should be on smooth working capital position.

For this analysis the ratios, working capital requirements for the next five years period to

enables meaningful planning for the future.

Researcher worked and applied various tables in relevant ratio from the data collection in

Bharat Heavy Electricals Limited Researcher giving more suitable idea to the management
and developed the company in various way. Researcher analysis some table in statistical
approaches of trend line.
OBJECTIVES OF THE STUDY:
The study has the following objectives.
To provide a strong theoretical framework for analyzing financial statements.
To study the growth profile of the company during the study period.
To study the financial position of the company and operation of Bharat Heavy
Electricals Limited
To appraise financial soundness of the company.
To offer suggestions for improvement in the company.

SCOPE OF STUDY:
The study mainly attempts to analyze the financial performance of the company selected
for the study. The financial authorities can use this for evaluating their performance in future,
which will help to analyze financial statements and help to apply the resources of the company
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properly for the development of the company and IT employees to bring overall growth. The
present study attempt to develop a trend analysis model for Sales and Working Capital and Profit
and Loss Accounts. There can be forecasting to evaluate the overall performance of the Bharat
Heavy Electricals Limited in future.

LIMITATION OF STUDY
1. The Secondary data like annual reports of BHARAT HEAVY ELECTRICAL
LIMITED is collected from BHEL Trichy, hints the accuracy of the result of the
study will depends upon the accuracy of data provided by the company.
2.

The study covers only the period of 5 (2006 to 2011)

3. Various techniques, ratio statistical tools used in this study will have its own
limitation.

CHAPTER 3
RESEARCH METHODOLGY

Methodology is the systematic method or an activity, which is used to collect the information
required to complete this project work.
The data is collected by 2 methods:
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1. Primary data
2. Secondary data.
Primary data is collected through collecting information from company officers, from external
guide.
Secondary data, which is secondary in nature i.e. already, collected information this secondary
data is collected through Companys Annual Report and discussion with them.
Interpretation of:
Balance sheet
Profit and loss account
Annual reports

RESEARCH FINDINGS
Who Reports An Operating Measure?
While half or less of survey respondents (Weis 1999, Fischer and Gordon 2002) reported that
their institutions present an operating measure in the statement of activities, Table 1 shows that
59 percent of our sample report some type of operating measure. As shown in Table 1,
institutions that report an operating measure tend to be significantly larger than those that do not
on most dimensions, ranging from total assets to enrollment.
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We found that 80 percent (24 of the 30) institutions classified as research and doctoral
universities presented an operating measure. In contrast, approximately half of the
comprehensive masters and baccalaureate schools reported an operating measure, and
specialized schools were the least likely (39 percent) to report an operating measure. Institutions
with an operating measure also charged higher tuition per student and were less tuitiondependent. Panel A shows that colleges and universities that use the major (Big
Five) accounting firms more often include an operating measure in their statements of activity.
Nearly 64 percent of schools with a Big Five auditor presented an operating measure. The
institutions audited by smaller CPA firms were significantly less likely to report an operating
measure (Chi-square 12.915, 1 d.f., p=.0003). Panel B of Table 2
Measuring Operations at U.S. Universities Page 10 shows that the Big Five audit firms were
associated with the larger institutions. The differences were significant for both financial and
enrollment-based measures of size.

What Is Included In Non-operating Section?

Table 3, Panel A shows the nature of items classified as non-operating by schools that presented
an intermediate measure of operations. Investment income and contributions were the two items
most frequently included in the non-operating section of the statement of activities. Each item
was reported by 60 percent or more of the 122 schools with an operating measure. The next most
common item came in a distant third: actuarial gains or losses and other changes in value of
split-interest agreements were reported in the non-operating section by 19 institutions (15.6
percent).

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Investment income, gains or losses.

Only five schools in our study classified all investment-related revenues and gains as
non-operating. In some cases, dividends and interest income were reported as operating and
gains/losses were reported as non-operating. Other schools used their endowment spending
policy to determine the amount included in operating revenue. In other words, interest and
dividends might be in the non-operating section if they exceeded the spending formula.
Likewise, some portion of investment gains from current or prior years might be included in
operating revenue if investment income fell below the spending formula. In many cases,
investment-related amounts were commingled so that the revenues (interest and dividends) and
gains/losses could not be segregated. While nearly half of the institutions in our study (97
schools) discussed an endowment spending policy, only 78 of the 97 (80 percent) provided a
specific percentage or range of percentages. The mean of the reported endowment

Measuring Operations at U.S. Universities Page 11 spending formulas was 5.3 percent.
As discussed earlier, Moodys Investor Services excludes from operating revenue any investment
income in excess of 4.5 percent of the beginning balance in cash and investments. For schools in
our study that split investment income between operating and non-operating, the percentage of
investment-related revenue classified as operating was 6.36 percent of the beginning balance in
cash and investments.7 Any reported endowment spending percentage would presumably apply
only to investments designated as true or quasi-endowments. Income, gains and losses on other
investments held by the institution might be handled differently. This additional investment

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income probably explains why the actual spending percentage exceeds the average reported
endowment spending formula.

Contributions and bequests.

Only 4 schools in our study classified all contributions as non-operating. Most (70 of 74)
of the schools that reported contributions in a non-operating section also reported contributions
among operating revenues. For these 70 institutions, the average proportion of contribution
classified as non-operating was 58 percent of total contributions. The criteria used to determine
whether a contribution was operating or non-operating in nature was rarely evident although
permanently-restricted gifts were almost always reported in the non-operating section. However,
unrestricted contributions were split between operating and non-operating by 44 of the 70
institutions that displayed contributions in both the operating and non-operating sections. For
these 44 schools, 26.3 percent of total unrestricted contributions were, on average, classified as
non-operating.

REVIEW OF LITERATURE

The Hershey Company engages in the manufacture, marketing, distribution, and sale of
various types of chocolate and confectionery, refreshment and snack products, and food and
beverage enhancers in the United States and internationally. The Hershey Company sells its
products through sales representatives and food brokers, primarily to wholesale distributors,
chain grocery stores, mass merchandisers, chain drug stores, vending companies, wholesale
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clubs, convenience stores, dollar stores, concessionaires, department stores, and natural food
stores. The company was founded in 1894 and is based in Hershey, Pennsylvania. The Hershey
Company went public on the New York Stock Exchange (NYSE) in 1922
Tootsie Roll Industries, Inc., through its subsidiaries, engages in the manufacture and
sale of confectionery products. The company sells its products under the registered trademarks. It
distributes its products through candy and grocery brokers to wholesale distributors of candy and
groceries, supermarkets, variety stores, dollar stores, chain grocers, drug chains, discount chains,
cooperative grocery associations, warehouse and membership club stores, vending machine
operators, the U.S. military, and fund-raising charitable organizations.

CHAPTER 4

ANALYSIS AND INTERPRETATION OF DATA

In this chapter an attempt has been made to analysis how efficiently the analysis of
Financial statement is managed in Bharat Heavy Electricals limited. Financial tools such as
schedule of changes in ratio analysis, least squares, comparative statements have been used for
the purpose of analysis.

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The financial statement involves recording classifying and summarizing of various

business transactions. It is prepared for the purpose of presenting a periodical review or
report of the progress made by the concern and deals with the state of the investment, in the
business and result achieved during the accounting period. Financial statement, income
statement and position statement are the outcome of accounting process.

Ratio analysis is a technique of analysis and interpretation of financial statements. It is

used as a device to analysis and interpret the financial health of a firm. Analysis of a financial
statement with the aid of ratio helps to arrangements in decision making control.

LEARNING OBJECTIVES
Explain why ratio analysis is usually the first step in the analysis of a companys
financial statements.

List the five groups of ratios, specify which ratios belong in each group, and explain
what information each group gives us about the firms financial position.
State what trend analysis is, and why it is important.

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Describe how the Du Pont equation is used, and how it may be modified to include the
effect of financial leverage.

Explain benchmarking and its purpose.

List several limitations of ratio analysis.

Identify some of the problems with ROE that can arise when firms use it as a sole
measure of performance.

Identify some of the qualitative factors that must be considered when evaluating a
companys financial performance.

OVERVIEW
Financial analysis is designed to determine the relative strengths and weaknesses of a company.
Investors need this information to estimate both future cash flows from the firm and the riskiness
of those cash flows. Financial managers need the information provided by analysis both to
evaluate the firms past performance and to map future plans. Financial analysis concentrates on
financial statement analysis, which highlights the key aspects of a firms operations.

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Financial statement analysis involves a study of the relationships between income statement and
balance sheet accounts, how these relationships change over time (trend analysis), and how a
particular firm compares with other firms in its industry (bench-marking). Although financial
analysis has limitations, when used with care and judgment, it can provide some very useful
insights into a companys operations.

CHAPTER 5

SUMMARY
The U.S. system of higher education has many characteristics other than size that make it
unique in a broader international context. Nearly 3.5 million students attend some 1,700 private
institutions of higher education in the United States. There is considerable latitude in the design
of curricula, particularly for undergraduate programs. Private colleges often capitalize on this
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latitude to provide their vision of a liberal education. The diversity of the sector is treasured and
protected by a number of national associations that look after the interests of and publicize the
virtues of their member schools (Geiger 1986, 161). These schools compete with the public
sector for students, strive to remain independent even while courting public support, and struggle
to maintain diverse streams of revenue from students, alumni, and investments. Almost all of
them periodically borrow money in the capital markets.

Consistent with the diversity of the sector, the flexibility in FASB Statement No. 117 was
intended to let not-for-profit organizations make distinctions that they believe will provide more
meaningful information for the users of their financial statements (66- 68). This study focused
on one aspect of the permissible diversity in practice: operating performance measures on the
statement of activities. Our findings indicate that only 60 percent of private colleges and
universities report a separate operating measure. These schools tended to be the larger research
institutions audited by a Big Five audit firm. Among the schools that chose to display operating
income and operating revenue we found wide differences in definition and computation.

CONCLUSION
This paper has presented a group-based financial statement analysis project that was
incorporated into a preparer-based introductory financial accounting course, but the project
easily could be adapted to other settings, or to address additional issues. Because the project does
not require knowledge of journal entries, it could be incorporated into user-based accounting
courses and/or courses in accounting or finance targeted toward non-business majors. If a written
project is not desired, the questions posed by the project could be used to stimulate class
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discussions of financial topics. If individual assignments are preferred, the project is sufficiently
compact as to make individual completion feasible. If an international dimension is desired, the
project could be modified to require comparison of companies from different countries.
For many years, business leaders have been emphasizing the need for universities to
enhance students technical, communication, and critical thinking skills, to ensure that graduates
can effectively handle unstructured problems, to improve students abilities to make and defend
recommendations, and to improve students understanding of the broader business environment
and the drivers of corporate success. Projects such as the one described in this paper help
students to develop these desired abilities, and give students a richer understanding of the
importance of accounting information and the usefulness of accounting disclosures in the
decision-making process.

REFERENCES
American Institute of Certified Public Accountants, AICPA (2001), Proposed Statement of
Position Accounting for Certain Costs and Activities Related to Property, Plant and
Equipment. (Exposure Draft 6/29/01) (New York).
Avery, S. A. (2001), Nonprofit Financial Management Guidelines, www.saverycpa.com.
Chabotar, K. J. (1989), Financial Ratio Analysis Comes to Nonprofits, Journal of Higher
Education, Vol. 60, No. 2, pp. 188-209.

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Dickmeyer, N. and K. S. Hughes (1980), Financial Self-Assessment: A Workbook for

College, National Association of College and University Business Officers (NACUBO)
(Washington DC).
DiSalvio, P. (1989), Ratio Analysis in Higher Education: Caveat Emptor, Journal of
Education Finance.Vol. 14, pp. 500-512.
Engstrom, J. H. (1988), Information Needs of College and University Financial Decision
Makers, Research Report, Government Accounting Standards Board (Norwalk, CT).
Engstrom, J. H., and C. Esmond-Kiger (1997), Different formats, same user needs: A
comparison of the FASB and GASB college and university financial reporting models,
Accounting Horizons, Vol.11, No. 3, pp. 16-34.

APPENDIX
WEBLIOGRAPHY

www.google.com

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 www.icaias.blogspot.in

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