Chapter-1 Introduction to Financial Information / Accounting Information and its use:
Financial Statements and their Users; Objectives of Financial Statement Analysis; From
Business Activities to Financial Statements; Parts of the Financial Statements; Additional
Information Accompanying Financial Statements; Measurement in the Financial Statements;
Influences of the Accounting System on Information Quality; Financial Statement Analysis
in an Efficient Capital Market; Limitations of Financial Accounting Data for Financial
Statement Analysis.
Chapter-2 Financial Statement Analysis:
a) What is Analysis; Benefits of Analysis in understanding Financial Statements; etc.
b) Ratio Analysis: Common Sets of Financial Measures and Groups of Ratios: Liquidity
Measures and Ratios, Profitability Measures and Ratios, Activity Measures and Ratios,
Solvency Measures and Ratios, Overall Measures and Ratios: Earnings Per Share, Price to
Earnings Ratio, Price to Book Ratio, Dividend-Payout Ratio, Sustainable Growth Rate.
c) The Analysis of Profitability: The Analysis of Return on Common Equity, First-Level
Breakdown: Distinguishing Financial and Operating Activities and the Effect of Leverage,
Second-Level Breakdown: Drivers of Operating Profitability, Third-Level Breakdown: Profit
Margin Drivers, Turnover Drivers, Borrowing Cost Drivers.
d) Horizontal and Vertical Analyses: Comparative Financial Statement Analysis: Year-To
Year Change Analysis, Index Number Trend Analysis, Common-Size Financial Statement
Analysis.
Chapter-2 Financial Statement Analysis:
a) What is Analysis; Benefits of Analysis in understanding Financial Statements; etc.
b) Ratio Analysis: Common Sets of Financial Measures and Groups of Ratios: Liquidity
Measures and Ratios, Profitability Measures and Ratios, Activity Measures and Ratios,
Solvency Measures and Ratios, Overall Measures and Ratios: Earnings Per Share, Price to
Earnings Ratio, Price to Book Ratio, Dividend-Payout Ratio, Sustainable Growth Rate.
c) The Analysis of Profitability: The Analysis of Return on Common Equity, First-Level
Breakdown: Distinguishing Financial and Operating Activities and the Effect of Leverage,
Second-Level Breakdown: Drivers of Operating Profitability, Third-Level Breakdown: Profit
Margin Drivers, Turnover Drivers, Borrowing Cost Drivers.
d) Horizontal and Vertical Analyses: Comparative Financial Statement Analysis: Year-To
Year Change Analysis, Index Number Trend Analysis, Common-Size Financial Statement
Analysis.
Chapter-3 Distress Analysis and Financial Information:
Introduction - Problems of Operationalizing Financial Distress-Indicators of Financial
Distress, Uni-variate models of Distress Prediction - Multi-variate models of Distress
Prediction - Capital Market reaction of Financial Distress.
Chapter-4 Statement of Changes in Financial Position / Cashflow Statement:
Working Capital Basis and Cash Basis. IAS# 7 / Revised IAS # 7 (Effective from 1994):
Cash Flow Statements - Objectives - Scope - Benefits - Definitions of terms - Presentation of
a Cash Flow Statement - Objectives - Scope - Benefits - Definitions of terms - Presentation of
a Cash Flow Statement - Cash Flow Statement of Non-Financial Institutions - Cash Flow
Statement of Financial Institutions.
Chapter-5. Analysis of the Quality of Earnings:
Earnings Quality; Definition, Measuring Earnings Quality, Balance Sheet Analysis of
Earnings Quality, External Factors and Earnings Quality; Earnings Persistence: Recasting
and Adjusting Earnings for Analysis, Determinants of Earnings Persistence, Persistence of
Extraordinary Items in Earnings; Determinants of Earnings Quality, Detecting Income
Shifting, Detecting Transaction Manipulation, Justifiable Manipulation? Disclosure Quality,
Quality Scoring, Abnormal Returns to Quality Analysis.
Chapter-6 Analysis of Leverage:
Concept of Leverage - Operating Leverage - Financial Leverage - Financial Leverage and
Trading on Equity - Combined Total Leverage - Scope and Limitations of Leverage.
