Description

SESSION FEBRUARY – MARCH 2024
PROGRAM MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER 3
COURSE CODE & NAME DBFI302 FINANCIAL STATEMENT ANALYSIS &
BUSINESS VALUATION

Assignment Set – 1

1. Explain the divisions of the cash flow statement.
Ans 1.
In the field of financial accounting, the report on cash flows is an essential financial report that
reveals the flow of cash into and out of a company during a particular time. The statement is
utilized by all stakeholders to assess the financial liquidity and overall condition of a business.
The cash flow statement is broken down into three major sections that are: Operating Activities,
Investing activities, as well as Financing Activities. Each division provides an insight into
various aspects of the company’s cash flow, and is crucial to the analysis of financials and
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2. Illustrate the current assets in the Balance Sheet.
Ans 2.
Current assets play an important function on the balance sheet, giving insight into a company’s
current financial condition and its liquidity. They are anticipated to be transformed into cash or
consumed within a year or within the normal operating period of the company, whichever is the
longer. The current asset portfolio comprises a variety of key elements that each serve a distinct
3. Explain different techniques of forecasting.
Ans 3.
Forecasting is an essential tool that is used by both businesses and organisations to anticipate
future developments, trends, and behavior, which allows them to plan and make informed
choices. There are a variety of methods for forecasting, each one suited to various types of data
and strategic requirements. The methods can be broadly classified into quantitative and
qualitative techniques.
Qualitative Forecasting Techniques
The techniques of qualitative forecasting are usually employed when the data is limited as well
Assignment Set – 2
4. Explain the effect of leverage on operating and finance activities.
Ans 4.
Leverage, as a term in finance is the term used to describe the use of borrowed funds to boost the
investment’s potential return. This notion plays an important part in the operating and financing
aspects of a business and can impact profitability, risk and the overall health of financials. The
impact of leverage can be complicated, affecting various elements of the business as well as
5. Explain the evaluation of the P/E ratio
Ans 5.
It is the Price-to-Earnings (P/E) ratio has become among the most frequently used indicators to
assess the value of an investment. It is calculated by dividing the current value of the company
by its earnings per share (EPS). This ratio gives investors a an easy and quick method to
determine how much the market will pay for each dollar of current earnings, which is essentially
assessing the market’s expectations for future growth and profitability. An understanding of the
6. In 2022, an investor purchased 1,000 shares of the fictitious company Pearl Co. for $10
per share. The investor sold the shares for $12.50 a year later. During the one-year holding
period, the investor received $500 in dividends. The investor paid $125 in trading
commissions to buy ($50) and sell ($75) the shares. The company’s EBITDA for the year
2021 is $1,050,000. You are requested to evaluate Pearl Company for the year 2022.
Ans 6.
To assess the value of investment in Pearl Co. for the year 2022, we have to take into
consideration a variety of factors such as the return on the investment (ROI) in the point of view
of the shareholder, and also its financial results of the business using available information like
EBITDA. Let’s look at the calculation and analyze step-by-step.
Return on Investment of Investors (ROI)
Let’s first calculate the return on investment for the person who purchased and then traded the