Fin­an­cial state­ment Ana­lys­is

Course content

The first part of the course focuses on refreshing students’ knowledge of basic financial accounting and financial statements including the income statement, balance sheet, statement of changes in owners’ equity and cash flow statement. The first part also addresses the conceptual differences between accrual and cash flow based accounting. After completing the first part the student should be able to read and understand financial statements.
 
The second part of this course focuses on approaches to measure profitability. Key financial ratios like return on invested capital (ROIC) and Economic Value Added (EVA) are defined and analysed. After completing the second part the student should be able to conduct a ratio analysis measuring the profitability of a firm. Furthermore, the student should be able to compare different firms’ profitability.
 
The third part of this course focuses on different ways to measure growth and understand that growth is not necessarily beneficial. After completing the third part, students should be able to analyse growth and understand which kind of growth is beneficial for company value.
 

The forth part of this course is about liquidity risk analysis. We will analyze liqudity risk from different perspectives, such as capital strucutre, cash flow from operations, and short-term liqudity risk. We will also analyze the consequnce of liqudity constraints.

The fifth part of the course focuses on forecasting. It is about how to technically develop the pro forma statements. After completing this part of the course, students should be able to develop pro forma statements based on forecasting assumptions.

The sixth part of the course focuses on firm valuation. Different valuation approaches are introduced and the strengths and weaknesses of each approach are discussed. After completing the fifth and this part, students should be able to estimate the value of a firm.

The seventh part of the course is about credit analysis. Different techniques including ratio analysis and forecasting are introduced with the purpose of assessing a firm’s credit worthiness and the risk of default. The advantages of each approach are highlighted.

In the end, we will highlight the importance of accounting information quality, accounting flexibility. We will also introduce the common form of earnings management.