Institute: Central Board of Secondary Education (CBSE)
Topic: Financial Statement Analysis - Analysis of Financial Statements
shaalaa.com | Financial Statement of Companies
- 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).
- 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.
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.