Learning objectives
At the end of the course, students should:
• be familiar with the theory and practice of financial statement analysis with a clear emphasis on placing it in its broad business, financial and accounting context;
• understand the environment in which financial reporting choices are made, what the options are, how these options are used for various types of decisions and - most importantly - how to avoid misusing financial statement data;
• be able to apply a critical thinking approach to the analysis of financial statement information and should be aware of how alternative accounting methods affect earnings and key financial ratios;
• have a theoretical and practical appreciation of how business strategy analysis, accounting analysis and financial analysis can feed into the development of company valuation models, particularly accounting-based valuation models based on the abnormal earnings (residual income) valuation framework;
• possess a working knowledge of the tools and frameworks necessary to understand, analyse and evaluate financial statements;
• be able to use and transform financial statement data in order to conduct fundamental valuations of companies;
• be able to understand, analyse and evaluate a range of accounting and finance issues relating to the analysis of financial statements and appreciate the sources of data that may be useful in analysing the position, performance, and future business prospects of companies;
• be able to forecast future financial statements, determine the cost of capital, and apply fundamentals-based valuation techniques;
• be able to discuss and conclude in teams multiple viewpoints on a particular valuation case, and present and defend the joint findings and conclusions in a report.
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This course aims to provide students with an understanding of how to interpret and analyse financial statements for a wide variety of business analysis and valuation contexts. The course provides a framework that is needed to analyse a company's profitability, liquidity, and solvency. It also teaches how to evaluate a company's accounting choices and their impact on reported numbers, and how to develop adjusted accounting measures of performance to undo their effects. Furthermore, the course demonstrates by using real-life cases how to apply financial ratios, cash flow analysis and forecasting techniques to estimate future cash flows, analyse a company's risk exposure, and determine the value of the company.
Format
The course consists of lectures and tutorials.
Assessment method
- Group assignment (30% of the final grade)
- Written exam (70% of the final grade)
In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. Please note that access codes are not re-usable meaning that codes from second hand books do not work, as well as access codes from books with a different ISBN number. Separate or spare codes are usually not available.
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