Afs - Session 6 - Mms

8/6/2019 Afs - Session 6 - Mms

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Analysis of Financial

StatementsSemester II

Session 6


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AFS Viva 50 marks

10th April 2010

3:30 pm thru 6:30 pm


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HORIZONTAL MERGER

Horizontal merger takes place when two or more corporate firmsdealing in similar line of activity combine together. Elimination orreduction in competition, putting end to price-cutting, economiesof scale in production, R&D, are often cited motives underlying

such merger

The formation of Brook Bond Lipton India Ltd. through the merger ofLipton India and Brook Bond


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Company Analysis

Way ahead


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Kick off point Complete name of the Company

BSE / NSE Code # (in case of listed companies)

Registered Office, Administrative Office & other relevant (Factory,Service Centers) coordinates

Area of business of the Company

Core and Other Business of the Company


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Background Sector Overview

Industry Overview

Contribution to National Income thru the Sector / Industry This is important, since the contribution % determines benefits that a

government can offer to the sector eg. Sec 10A (Income Tax)

Growth rate of the industry Growth rate can be used as a benchmark to compare performance of the

Company Geographic reach of the sector Is the business location specific ?

Role of Government / Semi Government body in the industry ?

Is the sector regulated ? If yes, which Government body isresponsible for liberalization or tightening of norms ?

International governing body / trade block (eg. OPEC). Identifythe strong player / country


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Company Focus Vision & Mission of the Company

Long term & Short Term Goals of the Company

Image of the Company /How the Company is perceived by a investor / market / industry

Bonding between Company & Promoter / Promoter Group Reliance & Ambani

Infosys & N.R. Narayan Murty

Microsoft & Bill GatesThis bonding might not always be beneficial for the business

Attitude of management to move to the next level

Professional Management Vs Family Run


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Company Structure -HR Composition of Board of Directors

Organization Structure Vertical,Horizontal, Matrix

Age of employment # of years with the company

Sourcing of new talent internal, referrals, external (lateral),campus

Employment hazards exposure to risk

Presence of Employee / Trade union

Applicability of trade / labour laws

Background check for new hire at management levels

Employee benefits


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Product / Service Categorizing the product as Necessity or Luxury

What is the product / service Articulate the product (s) / service(s) offered by the Company

Target market for the product / service

Positioning the product / service on the value chain

Pricing decision basis of determining price

Product / Service Potential risk in functioning / fulfillment

Substitute and Complimentary product


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BCG Matrix


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Marketing Market Location Market Size Market Potential

Share of the Company in total market

Marketing policy of the Company (market skimming, penetrationetc.)

Growth strategy of the Company

Forrester Wave Diagram


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Financial Statements Key ratios dependant on :

Industry

Nature of business

Ratio of fixed to variable expenses

Rechargeable expenses in total cost

Working capital cycle

Exposure to ForEx fluctuation risk tools used to mitigate the risk Revenue Model - Cost Plus, Profit Model

Cash flow statement

FixedAsset accounting, procurement & retirement policy

Age of debtors,

Volume of idle funds

ROI%


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Tax Exposure Any pending assessment for the Company ?

Any order passed against the Company in I.T. Tribunal / Appeal /Court

Whether Company forms a PE for another non-resident Company?

Application of Transfer Pricing to the Company

Application of Service Tax / VAT / Excise / Customs

Any default by the company is complying with any one or all of theabove acts

Who is Officer in default ?


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Stock Exchange Data Last 52 weeks trading data High & Low, Trading Volumes

Reason for the dip in share price

Effect on market price of share to adverse sentiment in the market,about the Company / Industry / Sector

FII/OCB/FI investment behavior (buy / sell)


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Future outlook Pipeline projects

Repetitive customs / rate of repetition

Rate of conversion of prospect to customer

Marketing & Sales strategy

Long term growth plan

Competitive strategy

Growth Strategy Organic / Inorganic Expansion plan Forward integration / Backward integration /

Lateral / Diagonal movement


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Porters Five Force Model


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Questions /Comments ?

Rohit BhagwatCell : 99308-96787

[email protected]

Afs - Session 6 - Mms

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