Module description
What is the module about?
This course presents financial statement analysis from the point of view of the primary users of financial statements: company managers, creditors, and investors. The aim of this module is to provide students with tools to enable them to analyse financial statements and draw inferences about the performance and the value of a firm.
The course is structured in two broad parts. Financial analysis forms the first part, focusing on past and present performance evaluation to generate expectations about future performance (prospective analysis), credit rating and distress prediction. The second part, security valuation, focuses on market- and accounting-based models to derive the value of a firm. All analyses are conducted within the context of a firm’s industry and strategy. This is an applied and practical course. Concepts learnt in Year 1 and 2 will be applied to a real-life example.
Who should do this module?
This module is available to students who have done an introduction to Financial Accounting and Corporate Finance course. It is aimed at giving you a deeper understanding of the financial statements.
This course will be useful if students are looking to expand their understanding of financial statements and develop key analysis tools that facilitate practical financial statement analysis; Interpret balance sheets, profit and loss statements and cash flow statements on a time series and cross-sectional basis; Calculate and interpret measures of a company’s liquidity, operating performance, risk and growth potential; and Compute and understand the value of a stock using different valuation models.
Provisional Lecture Outline
Lecture 1: Framework for Analysis and Valuation Using Financial Statements
Lecture 2: Strategy and Industry analysis
Lecture 3: Accounting analysis and role of regulation
Lecture 4: Peer analysis
Lecture 5: Ratio and cash flow analysis
Lecture 6: Credit analysis
Lecture 7: Debt Ratings Methodology
Lecture 8: Forecasting
Lecture 9: Equity Valuation I: Comparable valuation
Lecture10: Equity Valuation II : DCF
Lecture 11: Revision
Assessment details
60% Group Analyst report
40% Individual coursework
Teaching pattern
Weekly Lectures
Weekly Tutorials
Suggested reading list
Key text or background reading
Palepu, K. G., Healy, P. M., & Peek, E. (2022). Business Analysis & Valuation: IFRS edition- Text and Cases. 6th Edition