Financial Statement Analysis
Course Code: BAM - 623
Credit Hours: 3 (3-0)
Department: Department of Banking & Finance or Lyallpur Business School
Course Description
This course focuses on the techniques and tools used to analyze financial statements for decision-
making purposes. It covers the interpretation of balance sheets, income statements, cash flow
statements, and related financial data to assess organizational performance, liquidity, solvency,
and profitability. Emphasis is placed on ratio analysis, trend analysis, and comparative
evaluation within the Pakistani business context, including banking and corporate sectors.
Course Objectives
To develop skills in interpreting and analyzing financial statements.
To understand key financial ratios and their implications.
To evaluate the financial health and performance of organizations.
To apply financial analysis techniques to real-world business scenarios.
Course Outline
Week 1: Introduction to Financial Statement Analysis
Purpose and scope of financial statement analysis
Types of financial statements: Balance sheet, income statement, cash flow statement,
statement of equity
Users of financial statements (investors, creditors, regulators)
Week 2-3: Framework and Tools of Analysis
Overview of financial reporting standards (IFRS, GAAP, and Pakistani regulations)
Techniques of analysis: Horizontal, vertical, and ratio analysis
Limitations of financial statement analysis
Week 4-5: Understanding the Balance Sheet
Components: Assets, liabilities, and equity
Analysis of liquidity and solvency
Case study: Balance sheet of a Pakistani bank or corporation
Week 6-7: Income Statement Analysis
Revenue, expenses, and profit measurement
Earnings quality and non-recurring items
Trend analysis and common-size statements
Week 8: Cash Flow Statement Analysis
Structure: Operating, investing, and financing activities
Free cash flow calculation and interpretation
Linking cash flows to operational performance
Week 9-10: Financial Ratios - Liquidity and Efficiency
Liquidity ratios: Current ratio, quick ratio
Efficiency ratios: Inventory turnover, receivables turnover, payables turnover
Practical application using Pakistani company data
Week 11-12: Financial Ratios - Profitability and Solvency
Profitability ratios: Gross margin, net profit margin, ROA, ROE
Solvency ratios: Debt-to-equity, interest coverage
Comparative analysis across industries (e.g., textile vs. banking)
Week 13: Advanced Analysis Techniques
Dupont analysis: Breaking down ROE
Forecasting financial performance
Detecting financial distress (Altman Z-score or similar)
Week 14: Financial Statement Analysis in Banking
CAMELS framework (Capital adequacy, Asset quality, Management, Earnings, Liquidity,
Sensitivity)
Regulatory requirements by State Bank of Pakistan (SBP)
Analysis of a Pakistani bank’s financials
Week 15: Case Studies and Practical Applications
Group project: Analyzing financial statements of a listed Pakistani company
Presentation of findings and recommendations
Discussion of real-world examples (e.g., Engro, HBL)
Week 16: Review and Emerging Trends
Recap of key concepts and techniques
Impact of digitalization and fintech on financial reporting
Exam preparation and Q&A
Learning Outcomes
Interpret financial statements to assess organizational performance.
Calculate and analyze key financial ratios effectively.
Apply analytical tools to evaluate liquidity, profitability, and solvency.
Understand the regulatory and practical context of financial analysis in Pakistan.
