4241: FINANCIAL ANALYSIS

Chapter # 02
Financial Statement Analysis &
Accounting

Prepared by:
MD. IMRAN HOSSAIN
Lecturer
Department of Finance
University of Dhaka
imran@du.ac.bd

Prepared by: MD. IMRAN HOSSAIN,

1
Lecturer, Finance, DU
Q1: What is Financial Statement Analysis (FSA)? (P-27)

• The judgmental process that aims to evaluate the current and

past financial positions and the results of operations of an
enterprise, with the primary objective of determining the best
possible estimates and predictions about future conditions and
performance.

• Financial statements provide the most widely available data

on public corporation’s economic activities, profitability,
solvency and financial conditions.

Prepared by: MD. IMRAN HOSSAIN,

2
Lecturer, Finance, DU
 Q2: Two major foundations of FSA discipline (P-27)

1. Thorough understanding of the financial statements

Accounting models
Languages, meaning and significance
Limitations of financial communications

2. Knowing the tools of financial analysis

Ratio analysis
Trend analysis
Common size statements
Valuation
Forecasting etc.

Prepared by: MD. IMRAN HOSSAIN,

3
Lecturer, Finance, DU
 Q3 & 6: Importance of FSA in decision making (P-4)

(same as Q1 of Ch# 1)
1. Credit grantors
2. Equity investors
3. Management
4. Acquisition and merger analysts
5. Auditors
6. Regulators
7. Government
8. Other interested groups

Prepared by: MD. IMRAN HOSSAIN,

4
Lecturer, Finance, DU
 Q4: Limitations of accounting data (P-30)

1. Monetary Expression only

2. Complexities in the accounting framework

3. Use of individual judgment

4. Interim nature and need for estimation

5. Cost balances

6. Unstable monetary unit

Prepared by: MD. IMRAN HOSSAIN,

5
Lecturer, Finance, DU
 Q7: Functions of accounting (P-35)

1. To measure the resources held by specific entities

2. To reflect the claims against and the interests in those entities

3. To measure the changes in those resources, claims and

interests

4. To assign the changes to a specifiable period of time

5. To express the foregoing in terms of money as a common

denominator

Prepared by: MD. IMRAN HOSSAIN,

6
Lecturer, Finance, DU
 Q8: Functions and purposes of accounting
accomplished at 2 levels (P-36)

1. The Recording function:

Governed by the principle of double entry bookkeeping
system
All transactions are recorded and classified and them
summarized under appropriate account designations.
2. Financial Statements:
4 types of financial statements of a company:
1. Income statement
2. Balance sheet
3. Cash Flow statement
4. Changes in owner’s equity

Prepared by: MD. IMRAN HOSSAIN,

7
Lecturer, Finance, DU
Q9: Basic equation under double entry bookkeeping
system (P-37)

A=L+E
• Where
A = Assets
L = Liabilities
E = Equity or Owners’ Equity or Capital

Prepared by: MD. IMRAN HOSSAIN,

8
Lecturer, Finance, DU
KULLU KHALASH!!!!

Prepared by: MD. IMRAN HOSSAIN,

9
Lecturer, Finance, DU.