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Video tutorials - Accountancy: Financial Statement Analysis - Analysis of Financial Statements (Central Board of Secondary Education (CBSE))

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shaalaa.com | Financial Statement of Companies

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Financial Statement of Companies [00:15:25]
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Series 1: playing of 3

Analysis of Financial Statements
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Description

Units/Topics-

  • Financial statements of a company: Statement of Profit and Loss and Balance Sheet in the prescribed form with major headings and sub headings (as per Schedule Ill to the Companies Act, 2013).

Scope:

  • Exceptional items, extraordinary items and profit (loss) from discontinued operations are excluded.
  • Financial Statement Analysis: Objectives, importance and limitations.
  • Tools for Financial Statement Analysis: Comparative statements, common size statements, cash flow analysis, ratio analysis.
  • Accounting Ratios:Objectives, classification and computation.
  • Liquidity Ratios: Current ratio and Quick ratio.
  • Solvency Ratios: Debt to Equity Ratio, Total Asset to Debt Ratio, Proprietary Ratio and Interest Coverage Ratio.
  • Activity Ratios: Inventory Turnover Ratio, Trade Receivables Turnover Ratio, Trade Payables Turnover Ratio and Working Capital Turnover Ratio.
  • Profltabtltty Ratios: Gross Profit Ratio, Operating Ratio, Operating Profit Ratio, Net Profit Ratio and Return on Investment.

Learning Outcomes-

After going through this unft, the students wtll be able to:

  • develop the understanding of major headings and sub-headings (as per Schedule Ill to the Companies Act, 2013) of balance sheet as per the prescribed norms / formats.
  • state the meaning, objectives and limitations of financial statement analysis.
  • describe the meaning of different tools of 'financial statements analysis'.
  • develop the understanding of preparation of comparative and common size financial statements.
  • know the meaning, objectives and significance of different types of ratios.
  • develop the understanding of computation of current ratio and quick ratio.
  • develop the skill of computation of debt equity ratio, total asset to debt ratio, proprietary ratio and interest coverage ratio.
  • develop the skill of computation of inventory turnover ratio, trade receivables and trade payables ratio and capital turnover ratio.
  • develop the skill of computation of gross profit ratio, operating ratio, operating profit ratio, net profit ratio and return on investment.
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