Unit 5

By:
Dr. Abha Kaneria
Report
 Your financial analysis report highlights
Preparation the financial strengths and weaknesses
of Financial of your business.
Statement
Analysis
 1. Gather financial statement information
Steps in 2. Calculate ratios
Preparing 3. Conduct a risk assessment
the report 4. Determine the value of your business
  Company overview
 Investment
Financial  Valuation
analysis  Discounted cash flow
report  Relative value
sections  Book value
 Risk analysis
 Details
  When a voluntary association of firms is
formed to achieve common goals and to
Types of enjoy the monopoly advantages, that
sort of initiative is called business
business combination.
combinatio  Combinations may take several forms,
ns such as horizontal, vertical, lateral, and
diagonal, circular, or maybe a mixture of
two or more of these types.
  A horizontal combination comes into
being when units carrying on the same
trade or pursuing the same productive
Horizontal activity join together with a common end
Combinatio in view.
ns  Facebook’s 2012 acquisition of Instagram
 Merger of Vodafone India and Idea
Cellular Limited
  Vertical integration is the combination of
firms in successive stages of the same
industry.
 Objectives of Vertical combinations:
Vertical  To eliminate the wasteful and unnecessary
expenses involved in carrying on the
Combinatio connected processes separately
ns  To eliminate middlemen functioning
between various units
 To securer economies in marketing,
advertising, and transport
 To maintain control over the quality of raw
materials and finished products
  Starbucks – 300,000 coffee farmers, T&D
programs for the suppliers of coffee
beans, Walmart, Target – supermarket
integration
Vertical  Starbucks versus Dunkin’ Donuts
Combinatio  Hermès – crocodile farms, and perfumery
ns labs
 Volkswagen, Huayou Cobalt and
Tsingshan Group for the extraction of
cobalt and nickel from Indonesia
  Lateral integration refers to the
combination of those firms which
manufacture different kinds of products
Lateral though they are ‘allied in some way.’
 Example –
Combinatio
 Paper manufacturers, stationery makers
n start a printing press or related business
  It is also called ‘Service’ integration
Diagonal integration comes into
Diagonal existence when a unit providing auxiliary
goods and services to industry is
Combinatio combined with a unit engaged in the
n mainline of production, within the
organization
  When firms belonging to different
industries and producing altogether
different products and combine under
Circular the banner of a central agency, it is called
a mixed or circular combination.
Combinatio  Tata group
n  Reliance group
 Mahindra
 L&T
  Elimination of Competition
Reasons for  To Solve Capital Problem
Business  To Achieve Economies of scale
Combinatio  Effective Management
n  Use of Technology
 Saving in Expenses
  Consolidated financial statements are
presented by a parent (also known as
holding enterprise) to provide financial
Consolidate information about the economic
d financial activities of its group.
 Uniform accounting policies should be
statements followed by the parent company
 From the date when the parent company
obtains the control of the subsidiary
  An intercompany transaction is a
Inter- transaction between affiliated companies
company (i.e., between a parent company and one
transactions of its subsidiaries or between a parent’s
subsidiaries).
and profit  1. Downstream transaction
confirmatio  2. Upstream transaction
ns  3. Lateral transaction
  In accountancy, "window dressing" is an
Window attempt that management makes to
enhance the visual appeal of a company’s
dressing financial accounts before they’re open to
the market.
  Cash Window Dressing
Methods of  Inventory Management
Window  Capitalization
Dressing in  Depreciation
Accounting  Current Liabilities
 Revenue
  Satyam Computers was founded by Mr.
Ramalingum Raju in 1987
 IT crown jewel companies – 4th largest IT
companies in India in 2008
 In 2008 awarded Golden Peacock Award for
best-governed corporation
Satyam  Accounting irregularities that exaggerated the
Scandal company’s sales and earnings for years
 Incorrect cash position of about $1.04 billion
 Scam - $1.47 billion (Rs. 7,800 crores)
 Mahindra group acquired Satyam
Thank you!