Module 1-: Financial Analysis and Reporting Learning Modules
Module 1-: Financial Analysis and Reporting Learning Modules
Module 1-: Financial Analysis and Reporting Learning Modules
Degree and
Program : Bachelor of Science in Business Administration
Major in Financial Management
Course Title
and Code : FM2 – Financial Analysis and Reporting
Module 1-
Fundamentals of
Financial Report
Financial Date Developed: Document No.
Analysis and July 2020
Reporting Date Revised: Issued by: Page
2of 12
URSB
Developed by: TWG4 – FM2
Lead Writer: E. Yunzal
Writers/Contributors: J. Revision #
Mercado, R. Calmada, E.
Madriaga, J. Florendo Jr.
INTRODUCTION
Financial analysis and reporting are one of the cores of modern business.
Financial reporting is important because not only is it a legal requirement in most
countries, it is also a way of providing pertinent financial data which would aid in
making decisions.
Utilizing financial data allows a company to not only share vital information both
internally and externally but also leverage metrics or insights to make significant
improvements to the very area that allows the business to flow. According to
Hasanaj and Kuqi (2019), assessing financial position and performance of an
enterprise is a skill that every manager needs to have to make the best and right
decisions for the company.
An acceptable financial reporting framework should be identified and used by the
management in the preparation and presentation of the financial statements.
Financial statement should be prepared for general purpose and it should also
fulfill the requirement of local laws and regulations.
Financial reports (or financial statements) are written records that convey the
business activities and the financial performance of a company.
Financial Date Developed: Document No.
Analysis and July 2020
Reporting Date Revised: Issued by: Page
3 of
URSB 12
Developed by: TWG4 – FM2
Lead Writer: E. Yunzal
Writers/Contributors: J. Revision #
Mercado, R. Calmada, E.
Madriaga, J. Florendo Jr.
There are three (3) basic financial reports/statements a company use. These are:
1. Balance Sheet
2. Income Statement
3. Cash Flow Statement
Cash Flow Statement provides data regarding all cash inflows and outflows of a
company from its ongoing operations during a given period. It measures how
well a company generates cash to pay its debt obligations, fund its operating
expenses, and fund investments.
9. Suppliers - Suppliers would like to deal with companies that have good
financial health. Thus, they are also users of financial statements and make
decisions to provide credit to the company
5. Issues on intangible assets - The intangible assets of the company are not
recorded on the balance sheet. Intangible assets include brand value, the reputation of
the company earned over a while, etc. While they help in generating more sales, they
are not included in the balance sheet. However, if the company has done any expense
on intangible assets, it is recorded on the financial statements.
7. Subject to fraud - There are many situations when the financial statement
becomes a tool to commit fraud. Window dressing of financial statement by the
management team itself is possible. An example of this is the case of Luckin Coffee in
China when on 2 April 2020, it announced that an internal investigation found that its
chief operating officer, Jian Liu, had fabricated the company's 2019 sales by "around
RMB2.2 billion" (US$310 million)(www.complainceweek.com).
8. No discussion of non-financial transactions - Financial statements do not
discuss non-financial issues like the environment, social responsibility and governance
concerns, and the steps taken by the company to improve the same. These issues are
becoming more relevant in the current generation, and there is an increased
awareness amongst the companies and the government.
REFERENCES:
Books
https://www.investopedia.com/terms/f/financial-statements.asp
https://www.accountingverse.com/accounting-basics/users-of-financial-
statements.html https://www.accountingtools.com/articles/users-of-financial-
statements.html https://www.wallstreetmojo.com/users-of-financial-statements/
https://efinancemanagement.com/financial-accounting/limitations-of-financial-
statements https://www.wallstreetmojo.com/financial-statement-limitations/
https://efinancemanagement.com/financial-accounting/limitations-of-financial-statements
Financial Date Developed: Document No.
Analysis and July 2020
Reporting Date Revised: Issued by: Page
7 of
URSB 12
Developed by: TWG4 – FM2
Lead Writer: E. Yunzal
Writers/Contributors: J. Revision #
Mercado, R. Calmada, E.
Madriaga, J. Florendo Jr.
ACTIVITY 1
Rubric in Activity 1
CRITERIA GRADE
NUMERICAL VALUE
2. Organization of thoughts
DESCRIPTION GRADE
NUMERICAL VALUE
Passing 3.00
ACTIVITY 2
1. Group your class into nine (9) groups.
2. The leader per group will participate in drawing lots to determine which among
the following financial report users their group will represent:
a. Management e. Government agencies
b. Business competitors f. Investors
c. Customers g. Lenders
d. Employees h. Credit rating agencies
i. Suppliers
3. The groups will list the uses of financial reports to them depending on the user
they got during the drawing of lots (Example: Group 1 got customer as user of
financial statements so they will make a list of the uses of financial reports as
customers, and so on.)
Financial Date Developed: Document No.
Analysis and July 2020
Reporting Date Revised: Issued by: Page
9 of
URSB 12
Developed by: TWG4 – FM2
Lead Writer: E. Yunzal
Writers/Contributors: J. Revision #
Mercado, R. Calmada, E.
Madriaga, J. Florendo Jr.
Rubric in Activity 2
CRITERIA GRADE
NUMERICAL VALUE
2. Organization of thoughts
4. Presence of teamwork
DESCRIPTION GRADE
NUMERICAL VALUE
Passing 3.00
SAQ1
Match column A with Column B by putting the letter of your answer in the first
column
Item COLUMN A COLUMN B
1. Land is recorded in the books at Php 1M, its acquisition A. Variation in accounting
cost. Five years after, the balance sheet of the company still principles
reflects the same amount.
2. Mr. Bueno, the accountant of ABC Co. is doing kiting in the B. Presence of estimates
company’s books
3. A student stated in his thesis that XYZ Co. is financially C. Errors and omissions
healthy after doing a comparative analysis of the company’s
reports from 2016 and 2017 only.
6. Mr. Dela Cruz, the company’s bookkeeper, recorded a F. Specific time period
purchase as Php 699 instead of Php 669 reporting
7. A company’s brand is something that is not recorded in its G. No discussion of non-
financial statements financial transactions
8. Jollibee has excellent marketing strategies not reflected in H. The theory of agency
its financial reports
I. Transactions are
recorded at historical costs
ASAQ1
1. I
2. D
3. F
4. A
5. B
6. C
7. E
8. G
Financial Date Developed: Document No.
Analysis and July 2020
Reporting Date Revised: Issued by: Page
12 of
URSB 12
Developed by: TWG4 – FM2
Lead Writer: E. Yunzal
Writers/Contributors: J. Revision #
Mercado, R. Calmada, E.
Madriaga, J. Florendo Jr.