Course Outline

AIR UNIVERSITY Multan Campus

Spring 2024
Faculty of Administrative Sciences
Department of Business
Administration

Course Title: Financial Statement Analysis

Class : BSAF 6th Semester Lab: (Required / Not Required)
Credit Hrs : 3 Hours
Prerequisites For this Course: N/A
This Course is Prerequisite For: Financial Accounting and Reporting
Instructor: Dr. Muhammad Ramzan
e-mail: mramzan@aumc.edu.pk Address: Air University, 16 km Bahawalpure road
Multan, Office B125
Web: http://www.aumc.edu.pk
Tel: 061-4508500, Ext. 548
Office Hours: Monday (09:00-16:00 hrs.)
Text Book (s) Financial Statement Analysis by Subramaniam and Wild 10th
Edition

Reference Intermediate Accounting by Donald E. Kieso, Weygandt

Book(s) and Warfield latest edition
Learning
 Accounting and Business Environment by Charles T.
Resources
Horgren 6th edition
 Financial reporting and analysis by Charles H. Gibson latest
edition
Other Companies Financial Statements through SBP and their websites
Resource(s)
Course Description
Using a user-oriented approach, students in this course study the basic principles of accounting and the
assumptions of the financial accounting model. They learn how to apply general purpose financial
statements and related data to derive estimates and make inferences useful in business decisions.
Students analyze the role of the income statement, balance sheet, statement of cash flows, footnotes and the
annual report in the financial reporting process. They learn the techniques of computing ratios in preparation
for financial statement analysis, interpret the ratios and study the limitations of ratio analysis. They examine
the past performance of the firm by analyzing the efficiency, financial condition, profitability, liquidity,
solvency and risk of a company using ratio analysis, including vertical and horizontal common-size
analysis, trend analysis and industry comparisons. They make forecasts of future firm performance. Finally,
students analyze the effects of earnings management, financial shenanigans, and choice of accounting
methods and variations in level of firm disclosures on financial statement analysis.

Objective Based Education Mapping of the Course

Program Learning Outcomes

PLO1 The students must be able to understand, illustrate, and apply the basic and specialized
: knowledge of business to find solution for any business problem.
PLO2 The students must be able to organize the relevant body of knowledge and communicate
: diverse ideas effectively.

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PLO3 The students must be able to lead any professional activity, manage any professional
: project or take an entrepreneurial initiative as a leader, manager, team player, or an
entrepreneur.
PLO4 The student must be able to demonstrate their knowledge and skills to advance higher
: studies in business and other relevant disciplines.
PLO5 The students must be able to demonstrate technical skills to gather, analyze, and critically
: evaluate business issues for innovative solutions.
PLO6 The students must be able to demonstrate a clear understanding of business ethics to
: evaluate different business situations.
Course Learning Outcomes
On completion of this course, students will have a thorough understanding of basics of accounting, develop
analytical skills and be able to formulate and present effective financial reports. Such knowledge and skill
will be highly applicable in both academic and business contexts. Specifically, after completing this course,
the student will be able to:
 Apply and interpret International Accounting Standards;
 Understand the relevance of financial accounting to internal and external stakeholders.
 Identify and apply principles and regulations relating to financial accounting and the preparation of
financial statements;
 Apply the processes of recognition, measurement and disclosure of accounting information in the
preparation of general purpose financial statements;
 Critically analyse and interpret case information and be able to develop a convincing argument to
present their views on relevant accounting issues;
 Work either individually or in a group to solve problems and communicate understanding of issues
relating to the preparation of financial statements.

The Learning Outcomes in this course also help students to achieve some of the overall Program Learning
Goals and Outcomes for the department of business administration. This course would enable students with
integrated knowledge and intellectual ability to think broadly and more deeply about the basic concept
about internal accounting standards and their application in financial reports.
Mapping of PLOs and CLOs
CLO1 CLO2 CLO3 CLO4 CLO5 CLO6
PLO1 * *
PLO2 * * *
PLO3 * * *
PLO4
PLO5 * *
PLO6 *
Class/Lecture Format
This course adopts the principles of student-centered learning and dialectics. This involves a combination of
providing information to students and motivating them to use this information in problem-solving environments. The
way students present and argue the reasoning behind their solutions demonstrates their knowledge of the area, as one
cannot convincingly argue something that is not understood. Arguing an issue also expands one’s understanding of a
topic as one is forced to consider alternative points of view. Finally, dialectics empower students to collaboratively
negotiate, rather than passively learn, an area or topic.
The course undertakes the following activities for achieving the objectives.
 Lectures
 Class Discussions
 Assignments
 Quizzes
 Presentations
 Individual and group learning activities/projects
Each class will have a topic, specific tasks, and reading material set in advance. A class will typically involve a
lecture/seminar – presenting a new topic and related readings – followed by hands-on activities related to the topic for

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the week. Students will be expected to present or discuss pre-specified reading material in the class. Please bring your
printed preparation work to class because these may be collected in selected weeks.

Weekly Lecture Plan

Wee
Topic Reading Reference
k
Intermediate
Introduction to Financial Accounting and Reporting Accounting by
Development of Generally Accepted Accounting Principles Kieso latest
1,2
(GAAP), Traditional Assumptions of the Accounting Model edition
Discussion
Financial Accounting and Accounting Standards Intermediate
Financial Statements, Reporting, need for FR, Users of Accounting by
3 accounting, issues in reporting, ethics in accounting and Kieso latest
reporting edition
Quiz and Assignment
Introduction to Financial Statements and Other Financial
Reporting Topics
Forums of Business Entities
The Financial Statements
Income Statement and related information
Income statement formats, Multiple steps, single step, irregular
items, comprehensive income, retained earnings.
Balance Sheet (Statement of Financial Position) ,Statement of Financial
stockholders’ Equity (Reconciliation of Stockholders’ Equity Statement
Accounts), Statement of Cash Flows (Statement of Inflows and Analysis by
4,5
and 6 Outflows of Cash) Subramaniam and
The Accounting Cycle: Recording Transactions, Recording Wild
Adjusting Entries, Preparing the Financial Statements, Tread
way Commission
10th Edition
Auditors’ opinion: Auditor’s Report on the Firm’s Internal
Controls, Report of Management on Internal Control over
Financial Reporting
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL
STATEMENTS, THE EFFICIENT MARKET HYPOTHESIS
CONSOLIDATED STATEMENTS, ACCOUNTING FOR
BUSINESS COMBINATIONS
Problems / Discussion/ Quiz
7 Financial statements and ratios Analysis Financial
Balance Sheet: BASIC ELEMENTS OF THE BALANCE Statement
SHEET, Analysis by
Assets _ Liabilities _ Stockholders’ Equity _ Quasi- Subramaniam and
Reorganization _Accumulated Other Comprehensive Income _ Wild
Employee Stock Ownership Plans (ESOPs) _ Treasury Stock _ 10th Edition
Stockholders’ Equity in Unincorporated Firms _ International
Consolidated Balance Sheet (IFRS)
Problems / Discussion (Case study Financial Policy at Apple
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 and Quiz )
Income Statement: BASIC ELEMENTS OF THE INCOME
STATEMENT, SPECIAL INCOME STATEMENT ITEMS, Financial
INCOME TAXES RELATED TO OPERATIONS, EARNINGS Statement
PER SHARE, RETAINED EARNINGS, DIVIDENDS AND Analysis by
8 STOCK SPLITS, LEGALITY OF DISTRIBUTIONS TO Subramaniam and
STOCKHOLDERS, COMPREHENSIVE INCOME, Wild
INTERNATIONAL CONSOLIDATED INCOME
10th Edition
STATEMENT (IFRS)
Problems / Discussion
Basics of Analysis: RATIO ANALYSIS, COMMON-SIZE
ANALYSIS (VERTICAL AND HORIZONTAL), YEAR-TO- Financial
YEAR CHANGE ANALYSIS, FINANCIAL STATEMENT Statement
VARIATION BY TYPE OF INDUSTRY, REVIEW OF Analysis by
9 Subramaniam and
DESCRIPTIVE INFORMATION, COMPARISONS,
RELATIVE SIZE OF FIRM, THE USERS OF FINANCIAL Wild
STATEMENTS 10th Edition
Problems / Discussion
Liquidity of Short-Term Assets; Related Debt-Paying Financial
Ability: CURRENT ASSETS, CURRENT LIABILITIES, AND Statement
THE OPERATING Analysis by
10 Subramaniam and
CYCLE, CURRENT ASSETS COMPARED WITH CURRENT
LIABILITIES, OTHER LIQUIDITY CONSIDERATIONS Wild
Problems / Discussion 10th Edition
Long-Term Debt-Paying Ability: INCOME STATEMENT
CONSIDERATION WHEN DETERMINING LONG-TERM Financial
DEBT-PAYING ABILITY, BALANCE SHEET Statement
CONSIDERATION WHEN DETERMINING Analysis by
11 LONG-TERM DEBT-PAYING ABILITY, SPECIAL ITEMS Subramaniam and
THAT INFLUENCE A FIRM’S LONG-TERM DEBT-PAYING Wild
ABILITY, JOINT VENTURES
10th Edition
Problems / Discussion

Profitability: PROFITABILITY MEASURES, TRENDS IN Financial

PROFITABILITY, SEGMENT REPORTING, REVENUES BY Statement
MAJOR PRODUCT LINES, GAINS AND LOSSES FROM Analysis by
12 PRIOR PERIOD ADJUSTMENTS, COMPREHENSIVE Subramaniam and
INCOME, PRO-FORMA FINANCIAL INFORMATION, Wild
INTERIM REPORTS
10th Edition
Problems / Discussion
For the Investor: LEVERAGE AND ITS EFFECTS ON
EARNINGS, EARNINGS PER COMMON SHARE, Financial
PRICE/EARNINGS RATIO, PERCENTAGE OF EARNINGS Statement
RETAINED, DIVIDEND PAYOUT, DIVIDEND YIELD, Analysis by
13 Subramaniam and
BOOK VALUE PER SHARE, STOCK OPTIONS (STOCK-
BASED COMPENSATION), RESTRICTED STOCK, STOCK Wild
APPRECIATION RIGHTS 10th Edition
Problems / Discussion/ Case study
14 Statement of Cash Flows: BASIC ELEMENTS OF THE Financial
STATEMENT OF CASH FLOWS, FINANCIAL RATIOS Statement
AND THE STATEMENT OF CASH FLOWS, ALTERNATIVE Analysis by
CASH FLOW, PROCEDURES FOR DEVELOPMENT OF Subramaniam and
THE STATEMENT OF CASH FLOWS Wild
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 Problems / Discussion/ Case study 10th Edition
Expanded Analysis: FINANCIAL RATIOS AS PERCEIVED
BY COMMERCIAL LOAN DEPARTMENTS, FINANCIAL
RATIOS AS PERCEIVED BY CORPORATE Financial
CONTROLLERS, FINANCIAL RATIOS AS PERCEIVED BY Statement
CERTIFIED PUBLIC ACCOUNTANTS, FINANCIAL Analysis by
15 RATIOS AS PERCEIVED BY CHARTERED FINANCIAL Subramaniam and
ANALYSTS, Wild
FINANCIAL RATIOS USED IN ANNUAL REPORTS,
10th Edition
DEGREE OF CONSERVATISM AND QUALITY OF
EARNINGS
Problems / Discussion/ Case study
16 Quiz and Revision

Class/Term/Semester Project/Assignment Outline

Assignment/Project Marks (30% Weightage)

There will be 4 to 5 assignments based on current scenario and relevance of the topic. One project regarding Peachtree
Accounting Software usage and six quizzes will be conducted.

Grading and General Course Policies

Grades
(The grade you earn during the semester will come from the following work.)
Midterm 25 Marks (2 Hrs duration)
Project/Quizzes/Assignment/Discipline 30 Marks
Final Exam 45 Marks (duration 3 Hrs)

Grading Criteria (Relative Grading Criteria)

Relative grading system will be used for this course as per the university policy.

Instructor Responsibilities
First, the lecturer is responsible for creating a learning environment that is stimulating and interesting, and that encourages
collaboration, knowledge sharing, and co-creation by all participants. The learning environment includes both the physical
and virtual spaces where learning and teaching activities take place. The aim is to develop an atmosphere of cooperation
and a spirit of learning, inquiring, and innovating in all activities underpinned by a sense of responsibility for our
individual and collective learning.
Student Responsibilities /Requirements
Students as active participants are expected to take responsibility for their individual and collective learning. While this
course is designed to foster students’ active participation and contribution to knowledge co-creation, this will not happen
unless students take seriously their roles and responsibilities. As active contributors’ students are expected to be prepared
for each class and take an active role in discussions and other learning activities. Students must ensure their…
 Timeliness in the class
 Professional/prescribed dress code
 Attendance
Eating, sleeping, reading, texting, listening to or working on unrelated materials, sidebar conversations, or “multi‐tasking”
using a computer or other electronic device is not permitted. Laptops (and similar devices) may be used in class for course-
related activities such as taking notes. Students may bring drinks such as water.
I am always willing to see my students and will go out of my way to schedule meetings. Please make sure that if you make
an appointment that you keep it. Finally, as will quickly become apparent, e-mail is by far the easiest and most reliable
method to reach me.
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 Other Requirements
In terms of performance in this class, I have very high expectations and anticipate outstanding work from each of you. I
hope for a very positive experience for us all. Keep in mind that if you do not deliver outstanding work then you will be
graded to reflect this. I ask that you contact me directly and immediately if you ever have any questions or concerns
regarding the class, and assignments, or your grade(s). I am always willing to help.
I do ask that all students be respectful and courteous to other class members as well as the professor. This includes turning
off cell phones and other electronic devices before class begins and arriving to class on time, as walking in late is
disruptive to other classmates and the professor. Those who walk in late will likely not receive attendance credit for that
day.
Academic Integrity
Integrity is a cornerstone of academia and permeates every aspect of academic discipline. AU Instruction 36-2609,
Academic Integrity defines academic integrity as “uncompromising adherence to a code of ethics, morality, conduct,
scholarship, and other values related to academic activity.” Every student enrolled in the university is responsible for
adhering to this standard. Students are warned that having knowledge of a violation and failing to report it is also a
violation of academic integrity.
Students found guilty of academic integrity violations are subject to sanctions imposed by AU. These sanctions can affect
student credit for completed work as well as a student’s eligibility for academic opportunities. Collaboration and
discussion in the online environment among students in the same seminar are highly encouraged, but each student is
expected to do his/her work. It is a breach of integrity to use, receive, or give work to another student outside of the work
course.
Original Work
Student work submitted for a grade must be composed solely by the student (or identified group of students for a group
assignment) except where documented following citation requirements, and it must be composed
specifically for the current assignment. No work previously submitted in any course, or elsewhere, will be resubmitted or
reformatted, in whole or in part, for submission in a current assignment without the prior written approval of the course
instructor. Additionally, students are prohibited from using the work of other students (current or former) in any way,
including the formulation of ideas or outlines, to complete assignments. The act of appropriating, or stealing, the literary
composition of another, or parts or passages of another’s writings, ideas, or language, and passing them off as one’s
work constitutes plagiarism. Every student must ensure quotations or paraphrased passages are properly cited within any
written work submitted.
Cheating
The act of giving or receiving improper assistance such as, but not limited to:
- Uploading and/or downloading study aids or notes (also known as “dirty purples,” “gouge,” or “the pony”) to or
from websites; or providing or receiving such notes via any other method
- Copying material from another’s assessment(test/paper/etc.)
- Using notes and issued materials, or other references not authorized for use during an assessment, or other
assigned work.
- Knowingly permitting another to copy work or presentation materials, or excerpts/ideas/answers from an
assessment.
- Collaborating with other persons on individual assignments, except as permitted
- Sharing study materials or any assessment information after completing an assessment. This is to preserve the
integrity of the assessment and ensure that all students have an equal opportunity at success in the program.
Cheating is a violation of academic integrity standards. Individuals who violate the academic integrity policy are subject
to adverse administrative and or disciplinary actions as described in AUI 36-2602.

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