Afs Study Course
2.12 Analysis of financial statements 100 Marks
Course Content
1. Revision of Balance Sheet and P&L statement fundamentals. * Indian Accounting Standards * Indian Accounting Standard vs US GAAP
(This would also cover the manipulations often done by companies to show higher profits)
2. Cash Flow Analysis * Measuring operating / financing and investing Cash flows. * Cash flows and life cycle state of a company * Cash flows and financial flexibility (linkages to dividend policy and over retention of profits)
3. Assessing Business Performance * Operational efficiency ratios (Gross profit, net profit margins and various turnover ratios) * Liquidity ratios – Current Ratio / Acid test * Profitability ratios, Valuation Ratios * EPS/ ROE/ ROCE/ Total Shareholder returns, Linkages between ROE & ROCE & optimal capital structure and determinants of PE multiple, Price to book value, EV/EBDITA multiple. * Capitalization ratios- Debt Equity, Debt to Assets. * Du-pont Analysis * Coverage ratios and credit analysis and ratings
(The emphasis will be on correct interpretation and correct measurement i.e. with necessary accounting adjustments for these ratios).
4. Free Cash flows to Equity / Firm * From earnings to free cash flows * Adjustment from standard accounting to correctly measure free cash flow. * Capitalisation leasing expense and R&D expenditure, correct treatment for amortization expense and deferred taxes * Measuring correct ROE & ROC after adjusting for inter-corporate investments. * Implication of the above mentioned adjustments on fundamental valuations / company and PE or Price / Book Value or EBDITA multiple.
5. Introduction to Advance Accounting Concepts * Merger and acquisition * Consolidation of balance sheets * Deferred taxes, minority interest * NOPAT and adjustments to NOPAT from EVA perspective to measure correct economic
Course Content
1. Revision of Balance Sheet and P&L statement fundamentals. * Indian Accounting Standards * Indian Accounting Standard vs US GAAP
(This would also cover the manipulations often done by companies to show higher profits)
2. Cash Flow Analysis * Measuring operating / financing and investing Cash flows. * Cash flows and life cycle state of a company * Cash flows and financial flexibility (linkages to dividend policy and over retention of profits)
3. Assessing Business Performance * Operational efficiency ratios (Gross profit, net profit margins and various turnover ratios) * Liquidity ratios – Current Ratio / Acid test * Profitability ratios, Valuation Ratios * EPS/ ROE/ ROCE/ Total Shareholder returns, Linkages between ROE & ROCE & optimal capital structure and determinants of PE multiple, Price to book value, EV/EBDITA multiple. * Capitalization ratios- Debt Equity, Debt to Assets. * Du-pont Analysis * Coverage ratios and credit analysis and ratings
(The emphasis will be on correct interpretation and correct measurement i.e. with necessary accounting adjustments for these ratios).
4. Free Cash flows to Equity / Firm * From earnings to free cash flows * Adjustment from standard accounting to correctly measure free cash flow. * Capitalisation leasing expense and R&D expenditure, correct treatment for amortization expense and deferred taxes * Measuring correct ROE & ROC after adjusting for inter-corporate investments. * Implication of the above mentioned adjustments on fundamental valuations / company and PE or Price / Book Value or EBDITA multiple.
5. Introduction to Advance Accounting Concepts * Merger and acquisition * Consolidation of balance sheets * Deferred taxes, minority interest * NOPAT and adjustments to NOPAT from EVA perspective to measure correct economic