This is an intermediate course which examines the analysis of financial information presented in firms’ financial reports. The course comprises three related sections: fundamental analysis; valuation; and, the application of fundamental analysis and valuation techniques to a variety of specific decisions. Fundamental analysis involves answering questions such as: how is the firm performing? how might the firm perform in the future? what risks does the firm face? In addressing these issues particular attention is paid to the impact of financial reporting choices on the relation between reported earnings and firms’ underlying economic performance. Valuation describes the methods by which our expectations of firms’ future performance may be converted to a present day value of the firm’s assets, and the various financial claims on those assets. The final section of the course provides an introductory coverage to issues such as equity security analysis and credit analysis, with a strong emphasis on the use of financial statement data for these purposes.

On successful completion of the course you should be able to:

1. Describe and apply the basic techniques of financial statement analysis;
2. Explain the relationship between strategic business analysis, accounting analysis and financial analysis;
3. Identify and utilise value-relevant information contained within financial statements;
4. Recognise and explain the fundamental role of accounting numbers in the valuation of entities and the key financial claims on these entities assets (equity and debt securities);
5. Understand the impact of financial reporting choices on the usefulness of reported earnings to predict future performance;
6. Prepare a written analysis of a  listed company, which incorporates and synthesises the strategic, accounting and financing techniques covered in the course;
7. Conduct applied business research (including locating, critically interpreting and evaluating firm-specific financial information);
8. Work effectively in a team environment.

May include in class assessment (quizzes), assignments (individual or group), and a final examination.

At least three contact hours per week (a two hour lecture and a one hour tutorial) plus  6 hours per week private study time.

Pre-requisite:  BUSN7008 Financial Reporting and Analysis (or equivalent) 

Co-requisite: FINM7006 Foundations of Finance

Incompatibility: BUSN2XXX Financial Statement Analysis (proposed concurrently).

None

Palepu, K. G., P. M. Healy, V. Bernard, S. Wright, M. Bradbury, P. Lee, Business Analysis and Valuation Using Financial Statements: Text and Cases, Asia Pacific Edition, Cengage Learning, 2010.