Financial Reporting and Analysis
Financial Reporting and Analysis provides an introduction to both the concepts and associated tools that are the basic building blocks for analysing corporations via their financial statements. It will introduce and develop an economic framework for business analysis and corporate valuation (in part using the techniques developed in your finance course). The main focus of the course is to integrate key concepts of economics, accounting and finance in order to effectively evaluate the information content of financial reports and therefore to consider the impact on firm valuation and subsequent investment strategies. The course will use a number of case studies.
Internationalisation: Accounting theory and the frameworks covered in the course are internationally applicable. There are currently different accounting standards being applied across different countries however, we will discuss some of the main differences during the lectures.
Employability: Accounting reflects management decisions and provides this information to all stakeholders. This module develops your skills and confidence to understand and evaluate corporations especially their profit drivers, major risks and sustainability of performance. It introduces you to business strategy, financial analysis and forecasting and provides the fundamentals for firm valuation.
Research in Teaching: Theoretical discussion will be complemented, where appropriate, with insights from theoretical and empirical research in accounting, management and strategy.
Full module specification
|Module title:||Financial Reporting and Analysis|
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Duration (weeks) - term 1: |
The general aim of this course is to help you become sophisticated users of financial reporting information from a fundamental analysis perspective. You will be expected to develop valuation related and financial analysis skills to support the interpretation, evaluation and use of accounting information from the view point of major users of financial reports (i.e. equity investors, lenders, managers etc.) Case studies will be integrated into the lecture material to help support your understanding of the concepts.
All the ideas in this course are universal in their applicability. Your main text is more from a U.S. perspective but all the key concepts it discusses are applicable to any stock exchange listed firm anywhere in the world. Where appropriate we will endeavour in the lectures to highlight some of the significant ways in which international accounting differences are relevant to the analysis, and you are encouraged to share your observations and knowledge along these lines with the rest of the class.
ILO: Module-specific skills
- 1. identify the valuation implication of possible business strategies implemented by companies
- 2. understand how business activities determine value
- 3. detect the overall quality of financial reporting information provided by firms
- 4. understand the role of accounting information in a valuation setting
- 5. use accounting information to assess past and current firm performance and evaluate trading activities
ILO: Discipline-specific skills
- 6. understand the relationship between earnings and cash flows
- 7. understand the drivers of free cash flow and its use within a valuation contex
ILO: Personal and key skills
- 8. implement prospective analysis to forecast future earnings growth and ultimately determine firm value
The module is not only about understanding, but it is primarily about doing the analysis. Concepts and frameworks are only important if they lead to good analysis tools. Therefore, throughout this course break-out sessions will be provided to enable you to apply the tools discussed in lectures to a specific case study, which will then be discussed during the lectures.
The module is split in to two, two-day sessions. It is important that between these sessions you give yourself the opportunity to review the relevant readings (noted below) and make sure you have a clear understanding of the material covered in the first session. Between these sessions I will also be available to answer any queries (firstname.lastname@example.org ).
Indicative learning resources - Basic reading
Rice, A., Accounts Demystified: The Astonishingly Simple Guide to Accounting, 6th Edition (2011) – Part 2 and Part 3
For reference and further reading during and after module:
Peek, E., Palepu, K.G., Healy, P.M. Business Analysis and Valuation. Text and Cases, South-Western (2013). Chapters 1-6.
Penman, S., Financial Statement Analysis and Security Valuation, McGraw-Hill International Edition, Fifth Edition, (2012).
Subramanyam, K.R., Wild, J.J, Financial Statement Analysis, McGraw-Hill International Edition, Eleventh Edition, (2013)