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INANCIAL
ACCOUNTING
FOR MANAGEMENT
An Analytical Perspective
This page is intentionally left blank.
INANCIAL
ACCOUNTING
FOR MANAGEMENT
An Analytical Perspective
FiFth edition
AMBRISH GUPTA
Senior Professor
Finance and Accounts
FORE School of Management
New Delhi
Delhi • Chennai
Copyright © 2016 Pearson India Education Services Pvt. Ltd
Published by Pearson India Education Services Pvt. Ltd, CIN: U72200TN2005PTC057128, formerly
known as TutorVista Global Pvt. Ltd, licensee of Pearson Education in South Asia
No part of this eBook may be used or reproduced in any manner whatsoever without the publisher’s prior
written consent.
This eBook may or may not include all assets that were part of the print version. The publisher reserves the
right to remove any material in this eBook at any time.
ISBN: 978-93-325-5949-3
eISBN: 978-93-325- 7360-4
Head Office: A-8 (A), 7th Floor, Knowledge Boulevard, Sector 62, Noida 201 309, Uttar Pradesh, India.
Registered Office: Module G4, Ground Floor, Elnet Software City, TS-140, Block 2 & 9 Rajiv Gandhi
Salai, Taramani, Chennai 600 113, Tamil Nadu, India.
Fax: 080-30461003, Phone: 080-30461060
www.pearson.co.in, Email: companysecretary.india@pearson.com
To
My Father
and
My Late Mother
BRIEF CONTENTS
PART 1: THE FOUNDATION
Chapter 1 Measurement of Profit and Financial Position: I Business Transactions to Recording in Journal 2
Chapter 2 Measurement of Profit and Financial Position: II Journal to Trial Balance 32
Chapter 3 Measurement of Profit and Financial Position: III Trial Balance to Balance Sheet and
Profit and Loss Account: Non-corporate Entities 59
Chapter 4 Measurement of Profit and Financial Position: IV Corporate Entities 75
Chapter 5 Vertical Financial Statements of Corporate Entities 128
Chapter 6 Specific Day Books 141
PART 2: CONCEPTS AND PRINCIPLES
Chapter 7 Conceptual Framework of Financial Statements 162

Chapter 8 Generally Accepted Accounting Principles 177
PART 3: ASSET VALUATION
Chapter 9 Valuation of Tangible Fixed Assets 194

Chapter 10 Depreciation on Fixed Assets 222
Chapter 11 Valuation of Assets under Finance Lease and Intangible Assets, Amortization
and Asset Impairment 248
Chapter 12 Valuation of Inventories 280
Chapter 13 Valuation of Investments 308
viii Brief Contents
PART 4: UNDERSTANDING THE ANNUAL REPORT
Chapter 14 Corporate Financial Statements of Nestle India Ltd Along With Notes to Accounts and
Significant Accounting Policies 340
Chapter 15 Other Mandatory Financial Reports 389
PART 5: FINANCIAL STATEMENT ANALYSIS
Chapter 16 Quality of Earnings: Window Dressing, Creative Financial Practices and Issues Related to
Quality of Disclosures in Reported Earnings 414
Chapter 17 Financial Statement Analysis and the Tool Kit of the Analyst: I Multi-step, Horizontal,
Vertical and Trend Analyses and Analytical Balance Sheet 436
Chapter 18 Financial Statement Analysis and the Tool Kit of the Analyst: II Earnings Per
Share (EPS) Analysis 476
Chapter 19 Financial Statement Analysis and the Tool Kit of the Analyst: III Ratio Analysis 498
Chapter 20 Construction and Analysis of Corporate Cash Flow Statement 548
Chapter 21 Model for Strategic and Integrated Managerial Financial Analysis of Annual Report 606
PART 6: MORE ON FINANCIAL REPORTING AND ANALYSIS
Chapter 22 Analysis of Information from Sources Other than Annual Reports and
Inter-company Comparison 616
Chapter 23 Analysis of Group Performance: Consolidated Financial Reporting 632
Chapter 24 Emerging Dimensions in Voluntary Financial Reporting: Contemporary
Analytical Techniques 679
CONTENTS
Outstanding Pedagogical Features xxvii

List of Companies Whose Cases and Financial Practices/Information Have
Been Incorporated in This Book xxxv
Preface to the Fifth Edition xxxvii
Preface xli
About the Author xlv
PART 1: THE FOUNDATION
Chapter 1 Measurement of Profit and Financial Position: I Business Transactions to Recording in Journal 2
Introduction 3
India—The Place of Origin of Modern Accounting 4 chapter
1
The Anatomy of Business 5
Assets 5
Liabilities 6
Financial Position 7 Measurement of Profit and
Income 7 Financial Position: I Business
Expenses 7 Transactions to Recording in Journal
Financial Performance 7
The Accounting Process 8
Analysis, Documentation and Recording of Business
Transactions 9 Monetary Business Transaction
Analysis 9 Transactions
Documentation Recording
Analysis
Wonderland of Debit and Credit 10

Dual Aspect Concept 12
Accrual Concept/Mercantile System of Accounting 14
Documentation: Voucher 17
The process that leads to the measurement of financial performance and position of an
Recording: Journal 17 enterprise is known as Accounting Cycle. Accounting Cycle forms the very basis of financial
accounting. This chapter covers the cycle up to recording in journal.
Application of the Fundamental Accounting Concepts 22

A. Dual Aspect Concept 22
B. Business Entity Concept 22
C. Accrual Concept 22
Application of Other Fundamental Accounting Concepts 26
Cost Concept 26
Business Entity Concept Further Illustrated 26
Concluding Remarks 27
Keywords 27
References 27
Exercises 28
x Contents
Chapter 2 Measurement of Profit and Financial

Position: II Journal to Trial Balance 32 chapter
Introduction
Classifying Business Transactions
Summarising Business Transactions
33
33
36
2
Application of Other Fundamental Accounting Measurement of Profit and Financial
Concepts 43 Position: II Journal to Trial Balance
Realisation Concept 43
Money Measurement Concept 43 Recording Classification
Further Illustration of Some Fundamental

Accounting Concepts 47
Note on Computerized Accounting System 53 Documentation
MONETARY
BUSINESS
TRANSACTIONS
Alternative Presentation of Ledger Using Tally 54
Keywords 55 Transaction
Analysis
Summarizing:
Trial Balance
Exercises, Cases 55
The process that leads to the measurement of financial performance and position of an
enterprise is known as Accounting Cycle. Accounting Cycle forms the very basis of financial
accounting. This chapter covers the cycle up to trial balance.

Position: III Trial Balance to Balance
Sheet and Profit and Loss Account: Non-corporate Entities 59
Introduction 60
Measurement of Business Income and Financial
Position 60
3 Measurement of Profit
Trial Balance to Balance Sheet and Profit and
Loss Account
Analysis of Trial Balance
61
61
and Financial Position: III Need for Adjustments 62
Trial balance to Balance Sheet and Profit Inventory Valuation 63
and Loss Account: Non-corporate Entities Construction of Balance Sheet and Profit
Monetary
Transactions Trial Balance
and Loss Account 64
Transaction
General Instructions and Observations for
Preparing the Two Financial Statements 65
Analysis Analysis of Trial Balance
Brief Analysis of the Financial Statements of

Documentation Adjustments
Recording
Classification
Inventory Valuation
Bharat Scientific Products Enterprise 67
Summarizing:
Construction
of Financial
Statements
Balance Sheet
P & L Account
Recap of Fundamental Accounting Concepts 70
Trial Balance
Recap of Adjustments 70
Brief Analysis of Results
This chapter finally completes the accounting process of measuring the business performance
Keywords 71
and financial position by illustrating the construction of balance sheet and profit and loss
account of Non-corporate entities. Exercises, Cases 72
Contents xi
Position: IV Corporate Entities 75
Introduction
Basic Features of the Company form of Business
Organization
76
78
4
Registration Under the Companies Act 78
Types of Companies 79 Measurement of Profit and
Preliminary Expenses 80 Financial Position: IV Corporate Entities
Board of Directors 80
Financial Statements of Companies 80
Share Capital 81
Public Issue Expenses 83
Accounting Treatment of Share Capital 83
Form of Financial Statements 98
Some Features of Financial Statements 99
Issue of Shares at a Premium 106
Bonus Shares 107 From non-corporate, this chapter moves over to measurement of profit and financial position
of corporate entities. Company form of business organisation has certain peculiar features and
Recap of Adjustments 117 its financial statements are drawn in the format prescribed by the companies act, 2013.

Keywords 118
References 119
Exercises 120
Chapter 5 Vertical Financial Statements of

Corporate Entities 128
5
Introduction 129
Vertical Form of Financial Statements 129
Key Distinctive Features of the New Format 131
Process of Construction of Financial Statements
Vertical Financial Statements of in the New Form 132
Corporate Entities Vertical Financial Statements of Shashaank
SHASHAANK INDUSTRIES LTD.
Industries Ltd. 133
BALANCE SHEET AS AT 31-03-20CY
Merits and Demerits of Vertical Format 138
EQUITY AND LIABILITIES
Shareholders’ Funds
Note No. Amount (`)
Treatment of ‘Miscellaneous Expenditure Not W/O’
Share capital
Reserves and surplus
Sub-total….
1
2
14,95,000
1,22,570
16,17,570
and ‘Debit Balance of Statement of Profit
Non-current Liabilities
Long-term borrowings
Other Long term liabilities
3
5,85,000
….
and Loss’ 139
Long-term provisions
Current Liabilities
Sub-total….
4
…..
5,85,000 Treatment of Tax Expenses 139
Short-term borrowings
Trade payables
Other current liabilities
9,85,250
6,45,540
1,15,761
Short-term provisions
Sub-total…..
TOTAL…..
2,46,143
19,92,694
41,95,264
Keywords 140
References 140
The corporate financial statements are now required to be presented in vertical form.
Hence it is necessary to develop knowledge of how they are constructed.
Exercises 140
xii Contents
Chapter 6 Specific Day Books 141

Introduction 142
Specific Daybooks/Journals
Purchase Book/Purchase Day Book/Purchase
Journal
142
142
6
Sales Book/Sales Day Book/Sales Journal 146
Cash Book/Cash Day Book/Cash Journal 149
Concluding Remarks 156 Specific Day Books
Keywords 157
Exercises 157
PART 2: CONCEPTS AND PRINCIPLES
Chapter 7 Conceptual Framework of Financial

Statements 162
Increase in the volume of business often necessitates the maintaining of specific day books for
Introduction 163 specific voluminous transactions of the same type, more particularly in the case of corporate
entities. It is necessary to understand their respective roles.
Purpose of the Framework 164
Scope and Coverage 164
7 Components of Financial Statements

Research in Financial Reporting
Objective of Financial Statements
165
165
167
Users and Their Information Needs 168
Conceptual Framework of Assumptions Underlying Preparation of Financial
Financial Statements Statements 170
Qualitative Characteristics of Financial Statements 171
High Quality Financial Accounting
Reporting and Analysis
,
Constraints on Qualitative Characteristics 173
Concepts of Capital, Its Maintenance & Profit Determination
Recognition and Measurement of the Elements of Fin. Statements True and Fair View 173
Balancing among Characteristics
Definitions, Characteristics, Recognition

Faithful Representation
Comparability
Completeness
Substance over Form
Understandability
Prudence
Neutrality
Relevance
Materiality
and Measurement of the Elements of

Qualitative Chara
Fundamental
Assumptio
cial Statements
cteristics of Finan ns
ments
Financial State mation Needs
Financial Statements 174
Concepts of Capital and Capital Maintenance 174
Objective of r Infor
ts and Thei l Stateme
nts
ncial Statemen of Financia
Users of Fina ents
and Elem
Components

In the dynamic and complex business environment of the day, it has become imperative to have a
strong conceptual framework for accounting and financial statements that sets out the principles
Keywords 175
and concepts underlying their preparation and presentation.
References 175
Exercises 176
Contents xiii
Chapter 8 Generally Accepted Accounting Principles 177
Introduction 178
Sources of GAAPs
Conceptual Framework of Financial Statements
Accounting Concepts and Principles Other
178
178 8
than Those Covered by the Framework 179
Requirements of the Companies Act 179
Generally Accepted Accounting
Vertical Financial Statements of Nestle India Ltd. 182 Principles
Accounting Standards Formulated by ICAI 182
Convergence with International Financial
Reporting Standards (IFRSs) 184
Requirements of SEBI 185
Requirements of Income Tax Act 186
ICAI’s Standard on Accounting Policies: The Mother
Standard 187
AS-5: Net Profit or Loss for the Period, Prior Period
and Changes in Accounting Policies 187 The corporate accounts and financial statements are prepared and presented on the basis
of Generally Accepted Accounting Principles (GAAPs) as being presented above. Effective
Research in Financial Reporting 188 formulation of GAAPs assumes great importance in view of their far-reaching impact on the
quality of reported earnings.

Keywords 190
References 190
Exercises 191
PART 3: ASSET VALUATION
Chapter 9 Valuation of Tangible Fixed Assets 194

Introduction 195
Valuation of Fixed Assets 195
9 Meaning, Identification and Significance of

Fixed Assets
Research in Financial Reporting
195
196
Principles and Norms of Standard Accounting
Valuation of Tangible Fixed Assets Treatment 198
Determinants of Value of Fixed Assets 198
Valuation of Fixed Assets in Special Cases 201
Identification of Certain Specific Fixed Assets 203
Revaluation of Fixed Assets 204
Retirements and Disposals 205
Disclosures in Financial Statements 205
Impact of Government Grants and Borrowing
Costs on Fixed Assets Valuation 206
Tangible fixed assets, such as plant and machinery, enable companies to produce goods/ser-
vices and provide marketing and administrative support to their businesses. They lead to the
Accounting for Government Grants 206
generation of operational revenue, which speaks of their crucial importance. Hence, the need
for their proper valuation. Borrowing Costs 209
xiv Contents
Corporate Financial Practices 213

Valuation of Wasting, Non-Regenerative, Assets 215
10
Keywords 217
References 217
Exercises, Cases 218
Depreciation on Fixed Assets
Chapter 10 Depreciation on Fixed Assets 222
Introduction 223
Depreciation Accounting 223
Meaning and Significance of Depreciation 224
Research in Financial Reporting 224
Treatment 225
Value of fixed assets keeps on reducing over their useful lives due to their use. This reduction,
Determinants of Depreciation 226 known as depreciation, is charged to profit and loss account. Depreciation has a significant
bearing on the measurement of financial performance and position.
Methods of Depreciation 226

Statutory Requirements and Compliance 231
Book Profit and Taxable Profit 234
MAT and Deferred Tax 235
Consistency Principle: Change in Method 235
Depreciation Charge in Special Cases 237
Revaluation of Fixed Assets and Depreciation 237
Profit/Loss on Disposal of Fixed Assets 240
Depletion of Wasting, Non-regenerative, Assets 243
11 Concluding Remarks
Keywords
References
244
244
244
Valuation of Assets under Finance
Lease and Intangible Assets,
Amortization and Asset Impairment
Chapter 11 Valuation of Assets under Finance Lease and
Intangible Assets, Amortization and Asset Impairment 248
Introduction 249
Assets Under Finance Lease 249
Meaning of Lease and Finance Lease 249
Substance over Form 250
Treatment 250
The contemporary issues relating to fixed assets—finance lease, intangibles, their amortisation
and asset impairment—are providing a face-lift to the financial statements. The emphasis is on
substance over form, prudence, ensuring the sanctity of the financial statements and quality
of earnings.
Contents xv
Position Under the Income Tax Act 258
Intangible Assets and Their Amortisation 259
Goodwill 259
Meaning and Significance of Intangible Assets 259
Principles and Norms of Standard Accounting Treatment 262
Rates of Depreciation as Per Appendix I—Rule 5 of the Income Tax Rules 267
Impairment of Assets 270
Meaning and Significance 270
Keywords 277
References 277
Chapter 12 Valuation of Inventories 280

Introduction 281
Valuation of Inventories 281
Meaning and Significance of Inventories 282
Construction Contracts 285
Service Providers 285
Shares etc. held as Stock-in-Trade 286
Livestock and Agricultural etc. Products 286
12
Principles and Norms of Standard
Accounting Treatment 286
Valuation Policy 286
Cost of Inventories 286
Cost Formulas 289
Illustrations on the Methods of Valuation 291 Valuation of Inventories
FIFO 291
LIFO 293
WAC 293
Impact of the Three Methods of Valuation on COGs,
Gross Profit and Net Profit: A Comparison 294
Impact on COGS and Gross Profit 294
Impact on Net Profit 294
Techniques for the Measurement of Cost 295
Net Realisable Value 296
Inventories such as raw materials and finished goods in general, and in manufacturing compa-
NRV and ITS Impact on Valuation of Inventory, nies in particular, constitute the second largest item after fixed assets. Therefore, they require
a fair valuation so that the financial statements fairly portray the performance and financial
COGs, Gross Profit and Net Profit 298

position of the business.
xvi Contents

Keywords 302
References 303
Chapter 13 Valuation of Investments 308

Introduction 309
Valuation of Investments 310
Meaning and Significance of Investments 310
Scope and Coverage
Forms of Investments and Establishment of
their Market Values
313
314
13
Active Market or Absence Thereof 314
Treatment 314 Valuation of Investments
Classification of Investments 314
Cost of Investments 315
Valuation/Carrying Amount of Investments in the
Balance Sheet 318
Reclassification of Investments 320
Determination of Cost of Investments in Cases of
Rights Issue 321
Disposal of Investments 323
Shares and Other Securities held as Stock-in-Trade 324 Investments in general, and in manufacturing companies in particular, represent deployment of
surplus funds to earn dividends, interest, rentals and capital appreciation for strategic reasons.
Disclosures in Financial Statements 324 Investments represent major assets and business activities for investment companies. Their
performance depends on the results of this activity.
Investments in Subsidiary/Associate Companies 325

Investments in Jointly Controlled Entities 329
Keywords 333
References 333
Contents xvii
PART 4: UNDERSTANDING THE ANNUAL REPORT
Chapter 14 Corporate Financial Statements of Nestle India Ltd Along With Notes to Accounts and
Significant Accounting Policies 340
Introduction 341
Brief Profile of Nestle India Ltd. 342
Financial Statements of Nestle India Ltd. 343
Balance Sheet
Statement of Profit and Loss
Features of the Financial Statements
344
345
346
14
Corporate Financial Statements
Understanding the Inter-Linkage of the Financial Along With Notes to Accounts and
Statements 346 Significant Accounting Policies
Understanding the Various Accounts of Balance NESTLE INDIA LIMITED
Sheet and Notes Thereto 347

Shareholders’ Funds 347
Current Liabilities 352
Non-current Assets 354
Current Assets 359
Understanding the Various Accounts of the Statement
of Profit and Loss and Notes Thereto 363
Revenue from Operations 363
Cost of Materials Consumed 364
Changes in Inventories of Finished Goods,
Understanding the annual report is a precursor to analysing it. This chapter attempts developing
Work-in-Progress and Stock-in-Trade 365 its understanding with reference to the case of Nestle India Ltd.
Employee Benefits Expense 365

Depreciation 366
Impairment loss on Fixed Assets 367
Profit from Operations 368
Other Income 368
Finance Costs 369
Employee Benefit Expense Due to Passage of Time 369
Net Provision for Contingencies (Others) 370
Profit before Corporate Social Responsibility Expenses, Exceptional Items and Taxation 370
Corporate Social Responsibility Expenses 371
Exceptional Items 371
Profit before Taxation 371
Tax Expense 371
Profit after Taxation 372
Earnings per Share 372
A Brief on Deferred Tax Assets and Liabilities 372
Purpose Served by AS-22 374
xviii Contents
Keywords 374
References 375
Appendix 377
Employee Stock Option Plans 377
Chapter 15 Other Mandatory Financial Reports 389

Introduction 390
Auditors’ Report 391
Companies (Auditors’ Report) Order, 2003
or CARO
Corporate Financial Practices
392
396
15
Review of the Auditors’ Report of Nestlé 399
Directors’ Report 400 Other Mandatory Financial Reports
Review of the Directors’ Report of Nestlé 402
Corporate Governance Report 402
Objective and Importance of Corporate Governance 402
Suggested List of Items for Corporate Governance
Report 403
Non-mandatory Requirements 405
Review of Nestlé’s Report on Corporate Corporate annual reports contain, in addition to financial statements, some other financial
reports as well. Auditors’ report is an instrument of discharging attest function and expressing
Governance 405 opinion about the truth and fairness of financial performance and position. Corporate gover-
nance report seeks to report the effectiveness with which the management is discharging its
Management Discussion and Analysis Report 405

responsibility of running the corporate affairs. Management discussion and analysis report
seeks to present the management’s analysis of the physical and financial performance of the
company with a brief on future outlook. Report on CSR activities seeks to report the details of
Report and Its Contents 405 such activities together with the mandatory social spend.
Significance of MD&A 406

Review of Nestlé’s MD&A Report 406
Report on Corporate Social Responsibility (CSR) Activities 407
Requirements of the Companies Act, 2013 407
Review of Nestlé’s Report on CSR Activities 408
Keywords 409
References 410
Contents xix
PART 5: FINANCIAL STATEMENT ANALYSIS
Chapter 16 Quality of Earnings: Window Dressing,

Creative Financial Practices and Issues Related to Quality
of Disclosures in Reported Earnings
Introduction
Quality of Earnings
414
415
415
16 Quality of Earnings: Window
Dressing, Creative Financial Practices
Limitations of Financial Statements 416
and Issues Related to Quality of
Leverage Provided by GAAPs 416
Disclosures in Reported Earnings
Window Dressing 417
Creative Accounting/Creative Financial Practices 417
Non-provision of Diminution in the Value
of Long-term Investments 417
Changes in Accounting Policies 419
Extending the Accounting Year 421
Non-provisioning of Expenses and
Doubtful/Disputed Debts 421
Contingent Liabilities Not Provided for 422 Window dressing of financial statements is resorted to by the managements to portray a rosier
Impact of Other Income and Exceptional/ performance and financial position of the company than actuals to suit their motives. An analyst
needs to beat window dressing for a meaningful assessment of the quality of earnings.
Extraordinary Items 422

Some More Cases 425
Beating Window Dressing 426
Further Care in Analysis 426
Regulatory Efforts in Ensuring Quality of Earnings 427
ICAI Awards for Excellence in Financial Reporting 427
Background 427
Objective 428
Categories of the Awards 428
17 Financial Statement Analysis and

Awards to be Distributed
Important Factors for Selection of Awardees
Award Winners
428
428
430
the Tool Kit of the Analyst: I Concluding Remarks 431
Multi-step, Horizontal, Vertical and Trend Keywords 431
Analyses and Analytical Balance Sheet References 431
CORPORATE FINANCIAL PRACTICES Exercises, Cases 432
Liberty Shoes Ltd.
Extracts from Annual Report 2001–2002
Particulars 1994–95 1995–96 1996–97 1997–98 1998–99 1999– 2000– 2001–

2000* 2001* 2002
RESULTS FOR THE YEAR
Sales & Other Income 3041.07 4470.50 5398.68 6696.78 7667.94 7612.13 8520.00 7352.16
Chapter 17 Financial Statement Analysis and the Tool
Index
Profit before Depreciation & Tax
1.00
890.25
1.47
1019.22
1.78
1038.72
2.20
1126.54
2.52
1273.86
2.50
1278.38
2.80
1262.77
2.42
1083.07 Kit of the Analyst: I Multi-step, Horizontal, Vertical
and Trend Analyses and Analytical Balance Sheet 436
Index 1.00 1.14 1.17 1.27 1.43 1.44 1.42 1.22
Profit before Tax 802.43 862.13 862.30 921.46 1010.47 996.73 966.35 786.27
Index 1.00 1.07 1.07 1.15 1.26 1.24 1.20 0.98
Profit after Tax 627.56 744.02 731.30 756.46 837.97 740.73 590.191 620.36
Index
Equity Dividend (total outlay)
1.00
–
1.19
157.68
1.17
254.01
1.21
254.01
1.34
278.85
1.18
380.25
0.94
228.15
0.99
253.50 Introduction 437
Objectives of Analysis 437
Financial statement analysis seeks to evaluate the performance, financial strength, ability to
generate enough cash and the growth outlook of a company. A number of tools are available
in the tool kit of the analyst for this purpose. Five of them are covered here.
Various Stakeholders and Their Interests 438
Tool Kit of the Financial Analyst 438
xx Contents
Tools and Techniques 439

Multi-step Statement of Profit and Loss 439
The Tool 439
Format of Multi-step Statement of Profit and Loss 439
Analysis of Multi-step Income Statement of Bajaj Auto Ltd. 444
Horizontal Analysis 444
The Tool 444
Horizontal Analysis of Bajaj Auto Ltd. 448
Balance Sheet 449
Overall Assessment 449
Common-sized Analysis 450
The Tool 450
Comparative Common-sized Analysis of Bajaj Auto Ltd. and TVS Motor Company Ltd. 456
Statement of Profit and Loss 456
Balance Sheet 457
Trend Analysis 459
The Tool 459
Trend Analysis of Liberty 459
Quantitative Details 462
Position at The Year End 462
Analytical Balance Sheet 462
The Tool 462
Review of Analytical Balance Sheet of Shopper’s Stop Ltd. 464
Keywords 465
References 465
Chapter 18 Financial Statement Analysis and the Tool Kit

of the Analyst: II Earnings Per Share (EPS) Analysis 476
Introduction
Earnings Per Share
477
477
18
Significance of EPS 478 Financial Statement Analysis and
Scope and Coverage 478 the Tool Kit of the Analyst: II
Principles and Norms of Standard Accounting Earnings per Share (EPS) Analysis
Treatment 479
Presentation of BEPS and DEPS 479
Measurement of BEPS 479
Measurement of DEPS 486
An Illustration Now Follows to Clarify the
Above Discussion 487
Restatement of EPS Consequent to Issue of
Non-resource Generating Equity Shares Earnings Per Share (EPS) is the single most important ratio for the investors, capital market
After the Balance Sheet Date 493 and company valuation. EPS gets dilutive under certain circumstances. Dilutive EPS is the real
sustainable EPS.
Contents xxi
Per Share Information Other Than BEPS and DEPS 494
Keywords 495
References 495
Chapter 19 Financial Statement Analysis and the Tool Kit of the Analyst: III Ratio Analysis 498
Introduction 499
Ratio Analysis 499
Classification of Ratios 500
Structure of Discussion of Ratios
Background Note on Innovative Approach
towards Deriving Various Ratios
500
501
19
Financial Statement Analysis and
Return on Investment (ROI) Ratios 504
the Tool Kit of the Analyst: III
ROI Ratios of Grasim Industries Ltd. 508
Ratio Analysis
Solvency Ratios 509
Solvency Ratios of Grasim Industries Ltd. 512 GRASIM INDUSTRIES LTD.
ROI RATIOS
Liquidity Ratios 514 Ratio Formula 2011–12 2010–11 Comparison
Liquidity Ratios of Grasim Industries Ltd. 518

2011-12/ 2010-11
` Result- Result- ` Result- Result- Change Direction
crores % ` crores % ` of change
Resources’ Efficiency or Turnover Ratios 520

1. RONW N PAT X100 1177.00 × 100 13.66% 1181.71 × 100 15.47% –11.70% Down
D Net Worth:-
Equity 91.72 91.71
Resources Efficiency Ratios of Grasim Plus, Reserves and

surplus
8,524.85 7,547.85
2. EPS N PAT 1,177.00 128.35 1,181.71 128.87 –0.40% Down
Industries Ltd. 522 D Wtd. Av. No. of Eq.

Shares O/S-Crores
9.17 9.17
Profitability/Profit Margin Ratios 523

3. CEPS N PAT 1,177.00 144.08 1108.71 148.09 –2.70% Down
Plus, Non cash 144.20 176.29
charges
Multi-step Profit Margin(s) to Net Revenue from D Wtd. Av. No. of Eq.
Shares O/S-Crores
9.17 9.17
Operations Ratios of Grasim Industries Ltd. 524

Analysis continues with Ratio Analysis. It is a more focussed and comprehensive tool of anal-
Ratios of Individual ‘Other Expenses’ to Net ysis in that it establishes cause and effect relationships between either two items of balance
sheet or of profit and loss account or both the balance sheet as well as profit and loss account.
Revenue from Operations (%) of Grasim

Industries Ltd. 527
Ratios of Other Income (non-operating), Exceptional/Extra-ordinary
Items and Effective Tax Rate to PBT of Grasim Industries Ltd. 530
DU Pont Analysis 530
DU Pont Analysis of Grasim Industries Ltd. 532
Valuation or Capital Market Ratios 533
Valuation Ratios of Grasim Industries Ltd. 536
Overall Ratio Analysis of Grasim Industries Ltd. 538
Industry Benchmarking 539
Analysis of Grasim vis-à-vis industry 539
Core Ratios 540
Keywords 541
References 542
xxii Contents
Chapter 20 Construction and Analysis of

Corporate Cash Flow Statement 548
Introduction
Features of Cash Flow Statement Nestle
Reporting Cash Flow Statement
549
552
553
20
Meaning and Significance of Cash Flow Statement 553
Scope and Coverage 554 Construction and Analysis of
Principles and Norms of Standard Corporate Cash Flow Statement
Accounting Treatment 554 NESTLÉ INDIA LTD.
CASH FLOW STATEMENT
Cash and Cash Equivalents and Accounting For the Year Ended 31st December, 2014
Policy on Their Composition 554 2014 2013
Nestlé
(` in millions) (` in millions)
Basis for Classification of Activities 555 A. CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax
Adjustments for:
17,743.5 16,780.2
Operating Activities 555 Exceptional items

Other income considered separately
Unrealised exchange differences
(70.0)
(873.2)
39.7
(138.1)
(830.9)
(6.3)
Investing Activities 556 Deficit/ (Surplus) on fixed assets sold/scrapped/written off (net)
Depreciation
Finance costs
74.5
3,375.4
142.3
(12.1)
3,299.5
365.1
Financing Activities 557 Impairment loss on fixed assets

Operating profit before working capital changes
Adjustments for:
81.1
20,513.3
99.4
19,556.8
Methods of Reporting Cash Flows 557 Decrease/(increase) in trade receivables

Decrease/(increase) in loans & advances and other assets
Net cash from operating activities
(142.8)
336.7
16,440.2
32.9
(483.9)
17,964.0
Issues Requiring Special Considerations 559

Non-cash Investing and Financing Transactions 560 Cash flow statement depicts the cash generated and utilised by a company. It is imperative to
have a sound knowledge and understanding of the corporate cash flow statements as reported
Restricted Cash and Cash Equivalents 561 in annual reports, as illustrated here through the case of Nestlé India Ltd.
Additional Information 561

Disclosures in Cash Flow Statement 561
Construction of Cash Flow Statement from Abridged
Balance Sheet When No Additional Information is Provided:
Indirect Method 562
Construction of Cash Flow Statement from The Abridged Balance Sheet When More Notes
and Additional Information is Provided: Indirect Method 575
Analysis of Cash Flow Statements 593
Keywords 594
21
References 594
Model for Strategic and Chapter 21 Model for Strategic and Integrated
Integrated Managerial Financial Managerial Financial Analysis of Annual Report 606
Analysis of Annual Report
Introduction 607
Objectives of Strategic and Integrated Analysis 607
Model Framework for Integrated Analysis 608
Detailed Model 608
Keywords 613
References 613
Exercises 614
It is time now to begin a strategic and integrated managerial analysis of corporate financial
statements and financial reports forming part of an annual report. Keeping this in view a com-
prehensive model has been developed based on the annual report of Nestlé India Ltd.
Contents xxiii
PART 6: MORE ON FINANCIAL REPORTING AND ANALYSIS
Chapter 22 Analysis of Information from Sources Other

than Annual Reports and Inter-company Comparison 616
Introduction
Significance of Other Sources
Details of Other Sources of Financial Information
617
617
617
22
Study of Some Samples 618 Analysis of Information from
Research Report from Capital Market 618 Sources Other than Annual Reports
News Items from The Economic Times 620 and Inter-company Comparison
CFDS Portal: Corporate Filing and
Dissemination System 624
Inter-Company Comparative Analysis and
Analysis Against Industry Aggregates 625
Keywords 627
References 627
Virtually endless sources of financial information are available outside the published annual
report. The continuous availability of financial and business information after its publication is
most crucial for an analyst to keep himself updated. These sources fill this gap, that too with
Chapter 23 Analysis of Group Performance: accompanied analysis.
Consolidated Financial Reporting 632

Introduction 633
Consolidation of Subsidiaries 634
Consolidated Financial Statements 634
Meaning of Consolidated Financial Statements 634
Significance of Consolidated Financial Statements 635
23 Parent, Subsidiary and Group

Control
635
636
Treatment 636
Analysis of Group Performance: Global Consolidation 636
Consolidated Financial Reporting The Process of Consolidation 637
Prime Bank Ltd.
Minority Interest as on 31-03-2007 655
Status of the Consolidated Financial Statements 657
(Holding Company)
Prime Securities Ltd.

(Subsidiary)
95% 60%
Prime V enture Capital Ltd.
(Subsidiary)
Application of Other Accounting Standards 657
Consolidation of Associates 659
100% 74%
Prime Home Finance Ltd. Prime Life Insurance Ltd.

(Subsidiary) (Subsidiary)
90%
Prime AMC Ltd.

(Subsidiary)
Accounting for Investments in Associates in
Consolidated Financial Statements 659
Associate and Significant Influence 659
Capital provided by the shareholders of the parent company flows into other group companies.
Various stakeholders of the parent company, particularly the investors, are concerned to know
how the investments made in the group companies, out of money they provided to the parent
company, are faring. Consolidated financial statements bring out the real profitability and
financial position of the group to the fore.
xxiv Contents

The Equity Method 660
Further Issues 664
Disclosures in Consolidated Financial Statements 664
Consolidation of Joint Ventures 665
Financial Reporting of Interests in Joint Ventures 665
Types of Joint Ventures 666
Jointly Controlled Operations 666
Nature of the Joint Venture 666
Jointly Controlled Assets 667
Jointly Controlled Entities 668
Associates and Joint Ventures 673
Analysis of Performance of ICICI Bank Ltd. As a Group 675
Keywords 677
References 677
Exercise 678
24 Emerging Dimensions in Voluntary Financial Reporting: Contemporary Analytical Techniques 679

Introduction 680
Need for Voluntary Information 681
Growing Complexity of Financial Statements 681
Emergence of Contemporary Techniques
Value Reporting™
The Value ReportingTM paradigm
681
682
683
24
The Value ReportingTM Disclosure Model 683 Emerging Dimensions in Voluntary
Intangible Assets Score Sheet 684 Financial Reporting:
Intangible Assets 685 Contemporary Analytical Techniques
Human Resources 685
Intellectual Property Assets 685
Internal Assets 685
External Assets 685
The Score Sheet 685
Analysis (As Per Annual Report) 685
Infosys Intangible Assets Score Sheet 686
Human Resources Valuation 688
Value-added Statement 689 Accounting has been witnessing the emergence of new dimensions, as mentioned above, in
voluntary financial reporting. These techniques have yet to find widespread popularity. Yet they
strengthen the decision-making of the stakeholders. Leading companies, such as Infosys, have
Brand Valuation 691 been providing such information in their annual reports.
Contents xxv
The Strength of the Invisible 691
Valuing the Brand 691
Methodology 691
Brand Valuation 692
Balance Sheet (Including Intangible Assets) 693
Current-cost-adjusted Financial Statements 694
Balance Sheet 694
Profit and Loss Account 695
Economic Value-added (EVA®) Statement 697
Economic Value-added Analysis 697
Keywords 699
References 699
Exercises 700
Appendix 1 Present Value of An Annuity of APPENDICES

Rupee 1 Paid at The Year End 702
Appendix 2 Present Value Factor of A Lump
Sum (PVF) of Re 1 703 APPENDIX 1: PRESENT VALUE OF AN ANNUITY OF RUPEE 1 PAID AT THE YEAR END
APPENDIX 2: PRESENT VALUE FACTOR OF A LUMP SUM (PVF) OF RE 1
Index 679
OUTSTANDING
PEDAGOGICAL FEATURES
The outstanding pedagogical features in the book have been

designed to chart a clear and well-targeted route map for
16
students’ understanding and knowledge enhancement. These
features are:
Quality of Earnings: Window
Dressing, Creative Financial Practices
1. Chapter Openers and Issues Related to Quality of
Every chapter opens with a pictorial/diagrammatic presenta- Disclosures in Reported Earnings
tion and a nugget description of what lies ahead in the chap-
ter. Openers will initiate and stimulate the students’ interest.
2. Chapter Objectives
An exhaustive list of chapter objectives provides details of the
issues whose knowledge and understanding the students are
expected to develop by the time they finish a particular chapter.
CHAPTER OBJECTIVES
Window dressing of financial statements is resorted to by the managements to portray a rosier
This chapter seeks to enable you to develop knowledge and understanding of: performance and financial position of the company than actuals to suit their motives. An analyst
needs to beat window dressing for a meaningful assessment of the quality of earnings.
1 The fact that modern accounting owes its origin to India.
2 The anatomy of business and its relationship with financial accounting.
3 The steps involved in the process of accounting, up to recording, that leads to the measurement of profit and
financial position.
4 How to do documentation of business transactions by way of vouchers.
5 How to do recording of vouchers in journal.
6 Application of certain fundamental accounting concepts in the process.
7 Basic features of partnership firm and their implications for financial accounting.
Thus enabling you to be able to complete the accounting cycle in the chapters that follow. BIRD’S EYE VIEW
The Anatomy of Business
Assets
3. Bird’s Eye View Box n
— Fixed assets
— Current assets
Regular bird’s eye view boxes, which provide a snapshot of the — Investments
subject matter covered, enable students to know the coverage n Liabilities
— Long term (non-current) liabilities
of a particular section and help them in quick revision. — Current liabilities
n Financial Position
n Income
n Expenses
n Financial Performance
xxviii outstanding PedagogiCal features
4. Web site Resource Box

Visit www.mca.gov.in
During the course of discussion, regular references have been provided, if you wish to update
side-by-side, to the Web site resources on the subject matter covered to WWW yourself on company
enable the students to know more on the subject. law matters.
5. Publication Resource Box

For more details refer to the
‘Guide to the Companies Likewise, regular references have been provided, side-by-side, to the related books
Act’ by A Ramaiya or any on the subject matter covered to enable the students to further enhance their knowl-
other book on company law.
edge.
BEFORE YOU MOVE FURTHER...

6. Before You Move Further, Stop... Box
Stop. Think over, Discuss and Debate in Small Groups.
These boxes, containing discussion questions, have been
Do you agree with the following statements?
1. Since assets are debited, increase in assets has to be debited and decrease credited.
provided at regular intervals in the chapters. The objective
2. Since liabilities are credited, increase in liabilities has to be credited and decrease debited.
3. Since income is credited, increase in income has to be credited and decrease debited.
is to enable the students test and firm up the knowledge
4. Since expenses are debited, increase in expenses has to be debited and decrease credited. acquired by them in a particular section before moving
over to the next. It will encourage sharing of knowledge
and help them widen their horizons.
7. Chapter Illustrations CASE 2

A large number of illustrations are provided in the text of
each chapter. These illustrations aim at supporting the con- Horizontal Financial Statements of Bajaj Auto Ltd.
ceptual input provided during the text of the chapters with the
practicals and prepare the students to effectively handle the REPORT
chapter-end exercises. BAJAJ AUTO LIMITED

Distinctly Ahead……………….Since 1945
A. Case Studies A large number of case studies have been

BALANCE SHEET AS AT 31ST MARCH
(` in Crore)
Particulars Note 2012 2011
illustrated and analysed during the text throughout the book. EQUITY AND LIABILITIES
No.
A vast number of illustrations are case-centric. What is more,

Shareholders’ funds
Share capital 2 289.37 289.37
Reserves and surplus 3 5,751.70 4,620.85
barring one case, all others represent real life case studies of Non-current liabilities
6,041.07 4,910.22
a large number of leading Indian corporates and MNCs. The

Long-term borrowings 4 97.48 133.88
Deferred tax liabilities (net) 5 48.44 29.71
Other long-term liabilities 6 157.07 193.71
cases seek to illustrate to the students analysis of complex Long-term provisions 7 111.85
414.84
124.54
481.84
financial accounting issues through real life business situations

Current liabilities
Short-term borrowings 8 – 157.84
Trade payables 9 2,003.08 1,789.26
and appropriate decision-making. Other current liabilities

Short-term provisions
9
7
559.04
2,063.04
477.11
1,431.26
4,625.16 3,855.47
B. Corporate Financial Practices These are again leading REPORT

CORPORATE FINANCIAL PRACTICES
INDIAN OIL CORPORATION LTD.
corporates’ case studies, in large numbers, illustrated to Annual Report 2001–02
Extracts from Schedule E—Fixed Assets
drive home some complex issue but whose analysis has been JOINTLY OWNED FIXED ASSETS
left to the students. Gross Block Total Depreciation and

(` in Lakhs)
W.D.V.
as at Amortisation up to as at
31.03.02 31.03.02 31.03.02
Total Fixed Assets of the Company 29,74,061.06 10,96,081.90 18,77,979.16
Details of Company’s Share of Jointly Owned Assets Included Above
(` in Lakhs)
Assets Name of Joint Owners Original Cost Accumulated W.D.V.
Particulars Depreciated & as at
Amortization 31.03.02
Land—Freehold HPC/IBP 119.02 0.00 119.02
Land—Leasehold BPC/IBP 95.31 10.50 84.81
Buildings HPC 42.54 7.38 35.16
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America, Weir Mitchell. The greatest work on hysteria is the treatise
of Briquet.6
6 Traité clinique et thérapeutique de l'Hystérie, par le Dr. P. Briquet, 1859.
Mitchell7 has organized into a scientific system a valuable method of

treating hysteria, and has given to the world a series of studies of
some types of the affection best or only seen in the United States.
7 Fat and Blood: An Essay on the Treatment of Certain Forms of Neurasthenia and
Hysteria, and Clinical Lecture on Diseases of the Nervous System, especially in
Women.
Among other American monographs on hysteria and allied subjects

worthy of note are the contributions of Shaffer on The Hysterical
Element in Orthopædic Surgery;8 Seguin's essay on Hysterical
Symptoms in Organic Nervous Affections;9 Beard's volume on
Nervous Exhaustion;10 the chapters on Hysterical Insanity, etc. in
Hammond's text-books;11 and the papers of G. L. Walton12 on
Hystero-epilepsy. Spitzka, Mann, Hughes, and Kiernan have made
important contributions to the psychical aspects of the subject in
various American medical journals.
8 The Hysterical Element in Orthopædic Surgery, by Newlin M. Shaffer, M.D., New
York, 1880.
9 Archives of Neurology and Electrology, for May, 1875, and Opera Minora, p. 180.
10 A Practical Treatise on Nervous Exhaustion (Neurasthenia), by George M. Beard,

A.M., M.D., New York, 1880.
11 A Treatise on Diseases of the Nervous System, and A Treatise on Insanity in its

Medical Relations.
12 Brain, vol. v. p. 458, Jan., 1883; Journal of Nervous and Mental Disease, vol. xi. p.
425, July, 1884.
During the last five years I have published a number of articles and
lectures on the subject of hysteria and hystero-epilepsy, some of
which have been freely used in the preparation of this and the
succeeding sections.13 My first paper on hystero-epilepsy, in the
American Journal of the Medical Sciences, was written to strongly
direct the attention of the American profession to the subject as
studied in France. It was in large part a translation from the works of
Charcot, Richer, and Bourneville, with, however, notes of some
observed cases.
13 “Hystero-epilepsy,” American Journal of the Medical Sciences, October, 1881.
“Epileptoid Varieties of Hystero-epilepsy,” Journal of Nervous and Mental Diseases,

October, 1882.
“Illustrations of Local Hysteria,” Polyclinic, vol. i., Nos. 3 and 4, September 15,
October 15, 1883.
“Clinical Lecture on the Treatment of Hysterical Paralysis by Rest, Massage, and

Electricity,” Med. and Surg. Reporter, vol. 1. p. 168, February 9, 1884.
“Clinical Lecture on the Differential Diagnosis of Organic from Hysterical

Hemianæsthesia, etc.,” ibid. vol. 1. p. 233, 265, February 23, March 1, 1884.
“Clinical Lecture on Spinal Traumatisms and Pseudo-Traumatisms,” Polyclinic, vol. i.

No. 9, March 15, 1884.
“A Case of Nymphomania, with Hystero-epilepsy, etc.,” Medical Times, vol. xv. p. 534,
April 18, 1885.
“Hystero-epilepsy in the Male, etc.,” Medical Times, vol. xv. p. 648, May 30, 1885.
“Some Forms of Myelitis, their Diagnosis from each Other and from Hysterical
Paraplegia,” Medical News, vol. xlvii., Nos. 7 and 8, August 15 and 22, 1885.
“Clinical Lecture on Acute Mania and Hysterical Mania,” Medical Times, vol. xvi. p.
153, November 28, 1885.
PATHOLOGY.—Strictly speaking, hysteria cannot be regarded as
having a morbid anatomy. In an often-quoted case of Charcot's,14 an
old hystero-epileptic woman, affected for ten years with hysterical
contracture of all the limbs, sclerosis of the lateral columns was
found after death. On several occasions this woman experienced
temporary remissions of the contracture, but after a last seizure it
became permanent. This is one of the few reported cases showing
organic lesion; and this was doubtless secondary or a complication.
In a typical case of hystero-epilepsy at the Philadelphia Hospital, a
report of which was made by Dr. J. Guiteras,15 the patient, a young
woman, died subsequently while in my wards. Autopsy and
microscopical examination revealed an irregularly diffused sclerosis,
chiefly occupying the parieto-occipital region of both cerebral
hemispheres. Undoubtedly, as suggested by Charcot, in some of the
grave forms of hysteria either the brain or spinal cord is the seat of
temporary modification, which in time may give place to permanent
material changes. Old cases of chronic hysteria in all probability may
develop a secondary degeneration of the cerebro-spinal nerve-
tracts, or even degeneration of the nerve-centres themselves may
possibly sometimes occur. Two cases now and for a long time under
observation further indicate the truth of this position. One, which has
been reported both by H. C. Wood16 and myself,17 is a case of
hysterical rhythmical chorea in a young woman. Although the
hysterical nature of her original trouble cannot be doubted, she now
has contractures of all the extremities, which seem to have an
organic basis. The other patient is a woman who has reached middle
life; she has several times temporarily recovered from what was
diagnosticated as hysterical paraplegia, in one instance the recovery
lasting for months. Now, after more than four years, she has not
recovered from her last relapse. Contractures, chiefly in the form of
flexure, have developed, and she has every appearance of organic
trouble, probably sclerosis or secondary degeneration of the lateral
columns.
14 Leçons sur les Maladies du Système nerveux.
15 Philadelphia Medical Times, 1878-79, ix. 224-227.

16 Ibid., vol. xi. p. 321, Feb. 26, 1881.
17 Ibid., vol. xii. p. 97, Nov. 19, 1881.
Briquet18 reviews the various hypotheses which have been held as to

the pathological anatomy of hysteria, giving a valuable summary of
the autopsies upon supposed hysterical cases up to the time of the
publication of his treatise in 1859. About the sixteenth century,
Rislau, Diemerbroeck, and Th. Bonet sought to establish a relation
between lesions of the genital organs met with in the bodies of
hysterical women and the affection from which they suffered. About
1620, Ch. Lepois believed that he had established the existence of
certain alterations of the brain in cases of hysteria. Hochstetter and
Willis toward the beginning of the present century arrived at similar
conclusions. That researches into the state of the genital organs
have chiefly occupied those investigating hysteria is shown by the
writings of Pujol, Broussais, Lovyer-Villermay, and, above all, by
those of Piorry, Landouzy, Schutzenberger, and Duchesne-Duparc.
Georget, Brachet, Girard, Gendrin, Bouillaud, Forget, and Lelut,
about the fourth or fifth decades of the present century, made
numerous autopsies on those dying when hysterical phenomena
were in full activity, and concluded that the genital organs of these
individuals revealed nothing in particular. This, in brief, is also the
conclusion of Briquet. Jeanne d'Albret, the mother of Henry IV., who
was all her life subject to hysterical headache, had her brain
examined after death, but absolutely nothing was found. Vesalius
made an autopsy with equally negative results on a woman who died
from strangulation in an hysterical attack. Royer-Collard also found
nothing in an old hysteric. Briquet believed—and I fully accord with
this view—that in some of the cases of Ch. Lepois, Hochstetter, and
Willis diseases such as chronic meningitis were present with the
hysteria. He concludes that anatomy does not show anything
positive as to the seat or nature of hysteria, except the suspicion of a
certain degree of congestion in various parts of the brain.
18 Op. cit.
While, however, hysteria may not have a morbid anatomy, it, like
every other disease, has, in a correct sense, a pathology.
The ancients saw only the uterus when regarding hysteria.

Hippocrates described the hysterical paroxysm and its
accompanying disorders under the name of strangulation of the
uterus. The ancients generally supposed that the disease originated
in the ascent of the uterus to the diaphragm and throat. They
believed that this accommodating organ could wander at will
throughout the body, doing all manner of mischief. Hippocrates
asserted that it was the origin of six hundred evils and innumerable
calamities.
According to Sydenham,19 the disorders which are termed “hysterical

in women and hypochondriac in men arise from irregular motions of
the animal spirits, whence they are hurried with violence and too
copiously to a particular part, occasioning convulsions and pain
when they exert their force upon parts of delicate sensation, and
destroying the functions of the respective organs which they enter
into, and of those also whence they came; both being highly injured
by this unequal distribution, which quite perverts the economy of
nature.” Speaking of the strangulation of the womb, or fits of the
mother, he says: “In this case the spirits, being copiously collected in
the lower belly and rushing with violence to the fauces, occasion
convulsions in all the parts through which they pass, puffing up the
belly like a ball.”
19 The Entire Works of Dr. Thomas Sydenham, newly made English from the
Originals, etc., by John Swan, M.D., London, 1763, pp. 416, 417.
After a time, the idea that the uterus was the exclusive seat of
hysteria was in large measure supplanted by the view that the sexual
organs in general were concerned in the production of hysterical
phenomena. Romberg defined hysteria as a “reflex neurosis caused
by genital irritation.” Woodbury20 concludes as late as 1876 that only
where the pathological source of hysterical symptoms resides in the
uterus or ovaries, cases may, with some show of propriety, be
termed hysterical; and where the uterus and organs associated with
it in function are not in a morbid condition no symptoms can be
correctly called hysterical.
20 Medical and Surgical Reporter, December 2, 1876.
Bridges,21 another American writer, in a paper on the pathology of

hysteria, says that hysteria does not occur most frequently in women
with diseased wombs, but in those whose sexual systems, by
pampering and other processes, are abnormally developed and
sensitive. He makes the same point with reference to the male sex.
Sometimes, however, besides the emotional state in the male, there
is actual disease of the sexual organs, caused by abuse or over-
indulgence. Uterine disease and hysteria are sometimes like results
of one cause, and not respectively cause and effect: women are
hysterical oftener than men because the uterine function in woman's
physiology plays a more important part in the production of
emotional diseases than any organ of the male sex.
21 Chicago Medical Examiner, 1872, xiii. 193-199.
The truth would seem simply to be, that, as the uterus and ovaries
are the most important female organs, they are therefore a frequent
source of reflex irritation in hysterical patients.
Seguin22 adopts with some reservation Brown-Séquard's hypothesis

that cerebral lesions produce the symptoms which point out their
existence, not by destroying organs of the brain, but by setting up
irritations which arrest (inhibit) the functions of other parts of the
encephalon. He says that he finds no difficulty in believing that the
same symptom may exist as well without as with a brain lesion. “In
typical hysteria the functions of parts of the encephalon included in
the right hemisphere, or in physiological relation with it, are inhibited
by a peripheral irritation starting from a diseased or disordered
sexual apparatus or other part; and in case of organic cerebral
disease the same inhibitory action is produced. In both kinds of
cases we may have loss of rational control over the emotions, loss of
voluntary power over one-half of the body, and loss of sensibility in
the same part.”
22 “On Hysterical Symptoms in Organic Nervous Affections,” Archives of Electrology
and Neurology, for May, 1875.
Simply as a matter of passing interest, the attempt of Dupuy23 to

frame a pathology of hysteria is worthy of attention. According to
him, every local hysterical phenomenon is dependent upon an
abnormal state of either lateral half of the upper part of the pons
varolii. The centres of the pons, he holds, are perhaps merely
passive in the process, only becoming organically implicated when
various forms of permanent contractures and paralyses ensue.
23 Medical Record, New York, 1876, ii. 251.
The pathology of hysteria must be considered with reference to the

explanation of the exact condition of the cerebro-spinal axis during
the existence of certain special grave phenomena of hysteria, such
as hemianæsthesia, hemiplegia, paraplegia, and contractures.
What is the probable state of the nerve-centres and tracts during

these hysterical manifestations? If, for example, in a case of
hysterical hemianæsthesia it is admitted that the brain of the other
side of the body is somehow implicated, although temporarily, what
is the probable condition of this half of the brain? Is the cerebral
change vascular or is it dynamic? If vascular, is the state one of
vaso-motor spasm or one of paresis, or are there alternating
conditions of spasm and paresis? Are true congestions or anaæmias
present? If the condition is dynamic, what is its nature? Is it
molecular? and if molecular in what does it consist? Is it possible to
say absolutely what the pathological condition is in a disorder in
which autopsies are obtained only by accident, and even when
obtained the probabilities are that with fleeting life depart the
changes that are sought to be determined?
Two hypotheses, the vaso-motor and the dynamic, chiefly hold sway.
The vaso-motor, attractive because of its apparent simplicity, has
been well set forth by Walton,24 who contends that while it may not
be competent to easily explain all hysterical symptoms, it will best
explain some of the major manifestations of hysteria—for example,
hemianæsthesia. Hemianæsthesia, he argues, may appear and
disappear suddenly; it may be transferred from one side of the body
to another in a few seconds; so blood-vessels can dilate as in a
blush, or contract as in the pallor of fear, in an instant. In fainting the
higher cerebral functions are suspended, presumably because of
vaso-motor changes; therefore the sudden loss of function of one-
half of the brain-centres, seen sometimes in hysterical hemiplegia
and hemianæsthesia, may easily be imagined to be the result of an
instantaneous and more or less complete contraction of cortical
blood-vessels on that side. Neurotic patients have a peculiarly
irritable vaso-motor nervous system. He records a case seen in
consultation with H. W. Bradford. The patient had a right-sided
hemianæsthesia, including the special senses, the sight in the left
eye being almost wanting. The fundus of the right eye was normal;
the left showed an extreme contractility of the retinal blood-vessels
under ophthalmoscopic examination; these contracted to one-third
their calibre, and the patient was unable to have the examination
continued. The explanation offered is, that spasm of the blood-
vessels on the surface of the left cerebral hemisphere had caused,
by modification of the cortical cells, a right-sided hemianæsthesia,
including the sight, and by reaching the meninges a left-sided spastic
migraine, and by extending to the fundus of the left eye an
intermittent retinal ischæmia.
24 Journal of Nervous and Mental Disease, vol. xi., July, 1884, p. 424 et seq.
The vaso-motor hypothesis is held by Rosenthal,25 who, however,

wrongly gives the spinal cord the preponderating part in the
production of the symptoms. According to this author, the
anæsthesia and analgesia present in hysteria conform to the law as
established by Voigt with regard to the distribution of the cutaneous
nerves. The sensory nerves form at the periphery a sort of mosaic
corresponding to an analogous arrangement in the spinal cord. “It is
evident,” he says, “that the peripheral disorders in hysteria merely
represent an exact reproduction of the central changes, and that the
latter are situated, in great part, in the spinal cord.” He attributes a
large part of the symptoms of hysteria to a congenital or acquired
want of resistance of the vaso-motor nervous system. “Motor
hysterical disorders are also due in the beginning to a simple
functional hyperæmia, but in certain forms the chronic hyperæmia
may lead to an inflammatory process which may terminate (as in
Charcot's case) in secondary changes in the columns of the cord
and nerve-roots.” When the brain is involved in hysteria, he holds
that the most serious symptoms must be attributed to reflex spasms
of the cerebral arteries and to the consequent cerebral anæmia.
25 “A Clinical Treatise on Diseases of the Nervous System,” by M. Rosenthal, Vienna,
translated by L. Putzel, M.D., vol. ii. Wood's Library, New York, 1879.
The dynamic pathology of hysteria is probably believed in by most

physicians, and yet it is difficult to explain. Thus, Briquet26 says that
hysteria manifests itself by derangement of the nervous action, and
what is called nervous influence is something like electricity. It is
simply the result of undulations analogous to those which produce
heat and light; in other words, it is a mode of movement. Wilks27
compares some of the conditions found in hysteria to a watch not
going; it may be thought to be seriously damaged in its internal
machinery, yet on looking into it there is found a perfect instrument
that only needs winding up. As regards the brain being for a time
functionless, the possibility of this is admitted by all, as in sleep or
after concussion. He mentions the case of a young girl who had
been assaulted, and had complete paralysis of motion and
sensation. The shock had suspended for a time the operations of her
brain, and organic life only remained. We have only to suppose that
half of the brain is in this way affected to account for all the
phenomena of hemianæsthesia.
26 Op. cit.
27 Lectures on Diseases of the Nervous System, delivered at Guy's Hospital, by

Samuel Wilks, M.D., F. R. S., Philada., 1883.
According to the dynamic view, the central nervous system is at fault

in some way which cannot be demonstrated to the eye or by any of
our present instruments of research. The changes are supposed to
be molecular or protoplasmic, rather than vaso-motor or vascular.
As innervation and circulation go hand in hand or closely follow each

other, my own view is that both vaso-motor and molecular changes,
temporary in character, probably occur in the central nervous system
in grave hysterical cases.
Whatever the temporary conditions are, it is evident, on the one

hand, that they are not states of simple anæmia or congestion, and,
on the other hand, that they are not inflammations or atrophies.
Patients with hysterical manifestations of the gravest kind as a rule
are free for a time from their harassing and distressing symptoms.
This could not be if these symptoms were due to lesions of an
organic nature. Sudden recoveries also could not be accounted for if
the changes were organic.
Lloyd28 contends that most hysterical symptoms, if not all, are due to
abnormal states of consciousness. The development of this idea
constitutes his argument for the recognition of the disease as a true
psychosis. In the reflex action, not only of the lower spinal cord and
ganglia of special sensation, but of the highest centres of the brain,
he sees the explanation of many of the characteristics of hysteria. In
other words, he finds that the sphere of the disease is more
especially in the automatic action of the brain and cord.
28 Op. cit.
Dercum and Parker29 have published the results of a series of

experiments on the artificial induction of convulsive seizures which
bear upon this discussion of the pathology of hysteria. The
experiments were performed by subjecting one or a group of
muscles to a constant and precise effort, the attention being at the
same time concentrated on some train of thought. The position most
frequently adopted was the following: The subject being seated, the
tips of the fingers of one or both hands were placed upon the surface
of the table, so as to give merely a faint sense of contact—i.e. the
fingers were not allowed to rest upon the table, but were held by a
constant muscular effort barely in contact with it.
29 Journal of Nervous and Mental Disease, vol. xi., October, 1884, pp. 579-588.
Tremors commenced in the hands; these became magnified into

rapid, irregular movements which passed from one limb or part to
another until the subject was thrown into strong general convulsions.
Opisthotonos, emprosthotonos, and the most bizarre contortions
were produced in various degrees. No disturbances of sensation
were at any time present. Disturbances of respiration and phonation
were often present in a severe seizure, and the circulatory apparatus
was profoundly affected. A flow of tears, and occasionally profuse
perspiration, were sometimes induced. After severe seizures large
quantities of pale urine were passed. The reflexes were distinctly
exaggerated. No unconsciousness was ever observed, but a
progressive abeyance or paresis of the will. Nitrite of amyl seemed to
arrest the convulsive seizures at once.
In attempting to explain these phenomena Dercum and Parker refer

to the induction of Spencer as to the universality of the rhythm of
motion. Through the whole nervous system of every healthy animal a
constant rhythmical interchange of motion takes place. What might
be called nervous equilibration results. In man the will modifies and
controls the action of the nervous system; it assists in maintaining
nervous equilibrium when it is threatened. The will being withdrawn
from the nervo-muscular apparatus, and this being subjected to
strain, a disturbance takes place. This same explanation may be
applied to some of the convulsive and other phenomena of hysteria.
Comparing and analyzing the various views, it may be concluded

with reference to the pathology of hysteria as follows:
(1) The anatomical changes in hysteria are temporary.
(2) These changes may be at any level of the cerebro-spinal axis,

but most commonly and most extensively cerebral.
(3) They are both dynamic and vascular: the dynamic are of some
undemonstrable molecular character; the vascular are either spastic
or paretic, most frequently the former.
(4) The psychical element enters in that, either, on the one hand,
violent mental stimuli which originate in the cerebral hemispheres
are transmitted to vaso-motor conductors,30 or, on the other hand,
psychical passivity or torpor permits the undue activity of the lower
nervous levels.
30 Rosenthal.
ETIOLOGY.—Heredity has much to do with the development of

hysteria. It is not that it is so frequently transmitted directly after its
own kind, but this disorder in one generation generally indicates the
existence of some ancestral nervous, mental, or diathetic affection.
Briquet31 has shown that of hysterical women who have daughters,

more than half transmit the disease to one or several of these, and,
again, that rather more than half of the daughters of the latter also
become hysterical. Amann, according to Jolly,32 has stated that in
208 cases of hysteria he proved with certainty an hereditary
tendency 165 times—that is, in 76 per cent. This is too big to be true.
31 Op. cit.
32 Ziemssen's Cyclopædia of the Practice of Medicine, vol. xiv., American translation.
Briquet has also made some careful investigations into the subject of
the health of infants born of hysterical mothers. The investigations
were based upon a study of 240 hysterical women, with whom he
compared 240 other patients affected with such diseases as fever,
phthisis, cancer, diseases of the heart, liver, and kidneys, but without
any hysterical symptoms. In brief, the result of his investigations was
that children born of hysterical mothers die more frequently and at a
younger age than those who are born of mothers not hysterical.
The relation of hysteria to certain morbid constitutional states has
long been recognized, particularly its connection with the tubercular
diathesis. This has been shown by numerous observers, especially
among the French. The most valuable recent contribution is that of
Grasset,33 who believes that a direct connection can be traced
between the tubercular diathesis and hysteria. When the relations of
hysteria to the scrofulous and tubercular diathesis are spoken of by
him, it is not meant that hysterical subjects have tubercles in the
lungs, but that these diatheses are found in various generations, and
that among some subjects of the hereditary series the constitutional
states manifest themselves as hysteria. It is not the evidences of
hysteria with pulmonary and other tuberculous conditions that he is
considering, but that hysteria may be, and often is, a manifestation of
the tubercular diathesis. Two cases may present themselves: in one
the neurosis is the only manifestation of the diathesis; in the other, it
is continued in the same subject along with the other diathetic
manifestations. In demonstration of his thesis he concludes with a
series of most interesting cases, which he arranges into two groups.
In the first, hysteria is the only manifestation of the tubercular
diathesis; in the second, are simultaneous pulmonary and hysterical
manifestations. In the first group he has arrayed eight personal
observations and seventeen derived from various authors; in the
second he has two personal and seventeen compiled observations.
33 “The Relation of Hysteria with the Scrofulous and the Tubercular Diathesis,” by J.
Grasset, Brain, Jan., April, and July, 1884.
Personal experience and observation go far to confirm the views of

Grasset, although I recognize fully the strength of the objection of
Brachat and Dubois and others that, phthisis being such a common
complaint, it might be demonstrated by statistics that it was related to
almost any disease. Not only hysteria, but other neuroses or
psychoses, have a close connection with the tubercular diathesis.
Among the insane and idiotic and among epileptics phthisis is of

frequent occurrence. At the Pennsylvania Training School for
Feeble-minded Children the frequency of phthisis among the
inmates of the institution is one of the most striking clinical facts. The
insane of our asylums die of pulmonary troubles oftener almost than
of any other disease. The fact that hysteria is met with in the robust
and vigorous does not invalidate the position taken, for the robust
and vigorous who are not hysterical are not infrequently found in the
descendants of the tuberculous.
Laycock34 believed that the gouty diathesis was particularly liable to

give rise to the hysterical paroxysm or to irregular forms of hysteria.
Gairdner, quoted by Handfield Jones,35 supports this view.
34 A Treatise on the Nervous Diseases of Women, by Thomas Laycock, M.D.,
London, 1840.
35 Studies on Functional Nervous Disorders.
Gout in England plays a greater part in the production of nervous

and other disorders than in this country, but even here its
instrumentality is too often overlooked. In Philadelphia are many
families, some of them of English origin, in which gout has occurred,
sometimes of the regular type, but oftener of anomalous forms.
Among the most striking examples of hysteria that have fallen under
my observation, some have been in these families. In a few of them
remedies directed to the lithæmic or gouty conditions in connection
with other measures have been efficient. More frequently they have
failed, for while a relation may exist between the neurotic disorder
and the diathesis, it is not the diathesis, but the neurotic disorder,
which we are called upon to treat.
That a certain mental constitution predisposes to hysteria cannot be

doubted. Ribot36 describes, chiefly from Huchard,37 the hysterical
constitution. It is a state in which volition is nearly always lacking.
The prominent trait is mobility. The hysterical pass with increditable
rapidity from joy to sadness, from laughter to tears; they are
changeable, freakish, or capricious; they have fits of sobbing or
outbursts of laughter. Ch. Richét compares them to children, who
oftentimes can be made to laugh heartily while their cheeks are still
wet with tears. Sydenham says of them that inconstancy is their
most common trait: their sensibilities are aroused by the most trivial
cause, while profounder emotions scarcely touch them. They are in a
condition of moral ataxy, lacking equilibrium between the higher and
lower faculties.
36 Diseases of the Will.
37 Axenfeld et Huchard, Traité des Neuroses, 2d ed., 1883, pp. 958-971.
As to sex, it is almost unnecessary to say that hysteria occurs with

greater frequency among females than males; and yet it is all
important to emphasize the fact that it is not exclusively a disease of
the former sex. Some statistics on this subject have been collected.
In Briquet's often-quoted 1000 cases of hysteria, 50 only occurred in
men. I believe, however, that the proportion of hysterical men to
hysterical women is greater than this. Instead of a ratio of 1 to 20, as
these statistics would indicate, 1 to 15 would probably be nearer the
truth. Statistics upon this subject are deceptive.
The occurrence of hysteria in the male was little discussed before

the publication of Briquet's great work, but since that time it has
received great attention from the medical profession. Charcot38 in
some recent lectures at Salpêtrière has called attention to this
subject. From 1875 to 1885 he says that five doctoral theses have
been written on hysteria in men. Batault has collected 218 and Klein
80 cases. The Index Catalogue contains 102 references to hysteria
in the male.
38 Le Progrès médical, 1885.
Hysteria in men may take on almost any form that it shows in

women. It may occur in the strong, although more likely to be seen
among the weak and effeminate. Even strong, vigorous workmen are
susceptible, at times, to hysteria. According to Charcot, the duration
of the affection differs somewhat in the two sexes. In male patients it
lasts a long time and the symptoms are troublesome; in females the
contrary is usually although not always the case. The occurrence of
hysteria in the male sex has probably been overlooked through the
tendency to class symptoms which would be regarded as hysterical
in women as hypochondriacal in men.
One of the most typical half-purposive hysterical attacks that has

ever come under my observation was in a literary man of some
prominence. Hysterical syncope, contracture, hysterical breathing,
hysterical hydrophobia, coccygodynia, hemiparesis,
hemianæsthesia, and blindness are some other forms of hysteria in
the male of which there are clinical records the result of personal
observation. A remarkable case of hysterical motor ataxy was seen
in a boy who was for some time a patient at the Philadelphia
Polyclinic. Wilks39 records several interesting cases of hysteria in
boys. One simulated laryngismus stridulus, with paroxysmal
suffocative attacks and barking. Another was a case of hysterical
maniacal excitement; another was an example of malleation, or
constant movement as in hammering; still others were instances of
extreme hyperæsthesia, of anorexia, and of nervous dyspnœa. The
same author also dwells on the hysterical perversion of the moral
sense found in boys as in girls. He gives some instances clipped
from English newspapers—attempts to poison, murder or attempts to
murder, confessions false and true. Many instances could be added
from our own sensational American sheets.
39 Op. cit.
No age is free from a liability to hysteria. Its occurrence, however, at

certain periods of life with great frequency is well known. The
following table has been arranged from tables given by Briquet and
Jolly, and shows that it is of most frequent occurrence between the
ages of fifteen and thirty:
Age. Landouzy. Georget. Beau. Briquet. Scanzoni. Total.

0-10 4 1 — 66 — 71
10-15 48 5 6 98 4 161
15-20 105 7 7 140 13 272
20-25 80 4 3 71
64 289
25-30 40 3 — 24
30-35 38 — — 9 78 149
35-40 15 — — 9
40-45 7 1 — 1
44 65
45-50 8 — 1 3
50-55 4 — — 3
11 25
55-60 4 — 1 2
60-80 2 — — — 3 5
355 21 18 426 217 1037
Hysteria in the United States assumes almost every form, probably

because we have here represented almost every race and
nationality, either pure or mixed. While it cannot be clearly shown
that certain races are much more prone to hysteria than others, the
type of this disease is doubtless much influenced by racial and
climatic conditions. Certain phases of the disease prevail in certain
sections more than in others. Mitchell's40 experience is that the
persistent hystero-epilepsies, and the multiple and severe
contractures which Charcot and others describe, are rare in this
country among all classes, and especially uncommon in the lowest
classes, among which Charcot seems to have found his worst and
most interesting cases. He says that while his own clinic furnishes
numerous cases of neural maladies, and while he has examples of
every type of the milder form of hysteria, it is extremely uncommon
to encounter the more severe and lasting forms of this disease.
When Mitchell's Lectures were first published I was inclined to
regard hystero-epilepsy of the grave type as of rare occurrence, and
so stated in answer to a communication from him. Recently, as the
result of a longer experience, I have become persuaded that some
irregular forms are met with somewhat frequently in various sections
of our country. It remains true, however, that in the Middle and
Northern sections of the United States the graver hysterias of the
convulsive type are not nearly as frequently observed as in the
southern countries of Europe.
40 Op. cit.
Dr. Guiteras, formerly physician to the Philadelphia Hospital, and
Lecturer on Physical Diagnosis in the University of Pennsylvania,
now in the United States marine hospital service, has for several
years been on duty, most of the time, in Florida, the West Indies, and
the Gulf of Mexico. In answer to an inquiry made by me, he writes:
“Hysteria prevails with extraordinary frequency amongst the Cubans.
It presents itself in the shape of excito-motory and mental
phenomena, almost to the exclusion of all other manifestations. The
motory anomalies comprise the whole range from mild hysterics to
the gravest hystero-epilepsy. The latter is incomparably more
frequent in Key West than in Philadelphia. The confirmed hystero-
epileptics are few, but it is the rule for well-marked cases of hysteria
to present occasionally, often only once in the course of the disease,
hystero-epileptic seizures which may be of frightful intensity. By
mental disorders I do not mean only the acute attacks of excitement
and delirium which attend upon or take the place of convulsive
attacks, but I mean also to include the chronic form of hysterical
insanity, which is generally some variety of melancholia. These are
the peculiarities of hysteria as seen by myself in the Latin race in the
tropics. My experience teaches me that the Saxon race in the tropics
shows the same peculiarities to a less extent.”
In the region referred to by Guiteras it will be remembered there is a

mixed population composed largely of Spanish, French, and
Portuguese. Climatic and other local influences may have something
to do with the particular form which this disorder assumes in these
tropical or semitropical districts, but race would seem to be the most
important factor. In the section on Hystero-epilepsy I will speak of the
irregular type of this disorder, which has fallen most frequently under
my own observation.
Hysteria in the negro is of somewhat frequent occurrence, and is

more likely to be of the demonstrative or convulsive than of a
paralytic or negative form. Hysterical convulsions, particularly of the
purposive kind, and hysterical mania, are often met with in the
colored population of our large city hospitals and asylums.
The influence which climate exerts, like that of race, is rather on the
type of hysteria than upon the disease itself. Hysteria is found in
every climate, but in warm countries the disorder seems more likely
to be mobile and dramatic than when found in the more temperate or
colder zones.
Season and meteorological conditions have some influence on the

production of hysterical attacks. It is well known that hysteria,
chorea, and other allied nervous disorders are more likely to appear
in the spring than at other seasons. This fact has been shown by
various observers.
Hysteria may occur in any rank of life. It is not, as has been held by
some, a disease of the luxurious classes. The American physician
who has seen much of this disorder—and that means every
physician of large practice—has met with hysterical cases in every
walk of life. While this is true, however, hysteria of certain types is
met with more frequently in certain social positions. Some of the
remarks about race and climate apply also here. It is the type of the
disorder, and its relative frequency among various classes, which are
affected by social position. Young women of the richer classes, who
have been coddled and pampered, whose wants and whose whims
have been served without stint or opposition, often pass into
hysterical conditions which do not have any special determining
causative factor, or at least only such as are comparatively trivial.
Occasionally, in them hystero-epilepsy, catalepsy, and the train of
grave hysterical phenomena are observed. We are more likely,
however, to have the minor and indefinite hysterical symptoms; or, if
grave manifestations be present, they are most usually ataxia,
paralysis, contractures, or aphonia, and not convulsive phenomena.
Hysteria in our American cities is especially prevalent among certain
classes of working-people, as among the operatives in
manufacturing establishments. Dividing American society into the
three classes of rich, middle, and poor, hysteria is most prevalent in
the first and the last. It is, however, by no means absent in the
middle class.
The absence of occupation on the one hand, and, on the other, the
necessity of following work for which the individual is unfitted,
particularly irritating lines of work, predispose to the occurrence of
hysteria. It may be caused, therefore, either by no work, overwork, or
irritating work. As to the special occupations, hysteria would seem to
result most commonly in those positions where physical fatigue
combines with undue mental irritation to harass and reduce the
nervous system. In men it occurs often as the result of overwork
conjoined with financial embarrassment. It is met with not
infrequently among teachers, particularly those who are engaged in
the straining and overstraining labor of preparing children for
examinations. A good method of education is the best preventive; a
bad method is one of the most fruitful causes of the affection. The
injurious effect of American school or college life in the production of
hysteria is undoubted, and should be thoroughly appreciated. Our
educational processes act both as predisposing and exciting causes
of this disorder. Both in our private and public educational institutions
the conditions are frequently such as to lead to the production of
hysteria or to confirm and intensify the hysterical temperament. In
our large cities all physicians in considerable practice are called
upon to treat hysterical girls and boys, the former more frequently,
but the latter oftener than is commonly supposed. Hysteria in boys,
indeed, does not always meet with recognition, from the fact that it is
in boys. Cases of hysteria in girls under twelve years of age have
come under my observation somewhat frequently. About or just
succeeding examination-time these cases are largely multiplied. The
hysteria under such circumstances may assume almost any phase;
usually, however, we have not to deal in such patients with
convulsive types of the disease.
Clarke41 has considered some of these questions in connection

particularly with the physiological processes of menstruation, and its
bearing upon the inability of girls to maintain equally with boys the
stress of such competition.
41 Sex in Education, etc., by Edward H. Clarke, M.D., Boston, 1873.

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Financial Accounting For Management :

An Analytical Perspective 5th Edition

Financial and Management Accounting: An Introduction

FINANCIAL ACCOUNTING: A MANAGERIAL PERSPECTIVE, 6th

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PART 1: THE FOUNDATION

PART 2: CONCEPTS AND PRINCIPLES

Chapter 7 Conceptual Framework of Financial Statements 162

PART 3: ASSET VALUATION

Chapter 9 Valuation of Tangible Fixed Assets 194

PART 4: UNDERSTANDING THE ANNUAL REPORT

PART 5: FINANCIAL STATEMENT ANALYSIS

PART 6: MORE ON FINANCIAL REPORTING AND ANALYSIS

Outstanding Pedagogical Features xxvii

PART 1: THE FOUNDATION

Wonderland of Debit and Credit 10

Application of the Fundamental Accounting Concepts 22

Chapter 2 Measurement of Profit and Financial

Further Illustration of Some Fundamental

Chapter 3 Measurement of Profit and Financial

Brief Analysis of the Financial Statements of

Concluding Remarks 118

Chapter 5 Vertical Financial Statements of

Chapter 6 Specific Day Books 141

PART 2: CONCEPTS AND PRINCIPLES

Chapter 7 Conceptual Framework of Financial

Purpose of the Framework 164

Scope and Coverage 164

7 Components of Financial Statements

Definitions, Characteristics, Recognition

and Measurement of the Elements of

Concluding Remarks 174

Concluding Remarks 190

PART 3: ASSET VALUATION

Chapter 9 Valuation of Tangible Fixed Assets 194

9 Meaning, Identification and Significance of

Corporate Financial Practices 213

Methods of Depreciation 226

Chapter 12 Valuation of Inventories 280

COGs, Gross Profit and Net Profit 298

Disclosures in Financial Statements 300

Chapter 13 Valuation of Investments 308

Investments in Subsidiary/Associate Companies 325

Sheet and Notes Thereto 347

Employee Benefits Expense 365

Chapter 15 Other Mandatory Financial Reports 389

Management Discussion and Analysis Report 405

Significance of MD&A 406

Chapter 16 Quality of Earnings: Window Dressing,

Extraordinary Items 422

17 Financial Statement Analysis and

Particulars 1994–95 1995–96 1996–97 1997–98 1998–99 1999– 2000– 2001–

Tools and Techniques 439

Chapter 18 Financial Statement Analysis and the Tool Kit

Liquidity Ratios 514 Ratio Formula 2011–12 2010–11 Comparison

Liquidity Ratios of Grasim Industries Ltd. 518

Resources’ Efficiency or Turnover Ratios 520

Resources Efficiency Ratios of Grasim Plus, Reserves and

2. EPS N PAT 1,177.00 128.35 1,181.71 128.87 –0.40% Down