Upon successful completion of the course the student will be able to:

• Analyze and understand the business and competitive strategy of a firm
• Understand how accounting rules and conventions represent a firm’s business economics and strategy in its financial statements
• Analyze assets, liabilities, entities, revenues, and expenses
• Effectively evaluate a company’s accounting choices and accrual estimates
• Analyze financial ratios and cash flow measures of the operating, financing, and investing performance of a company relative to either key competitors or historical performance
• Develop forecasted financial statements and use them to make estimates of a firm’s value.

1. Framework for Business Analysis and Valuation Using Financial Statements

• The Role of Financial Reporting in Capital Markets
• From Business Activities to Financial Statements
• Influences of the Accounting System on Information Quality
• From Financial Statements to Business Analysis

2. Strategy Analysis

• Industry Analysis
• Competitive Strategy Analysis
• Corporate Strategy Analysis

3. Fundamentals of Financial Accounting

• Generally Accepted Accounting Principles (GAAP)
• Basic accounting equation
• Elements of Financial Statements (assets, liabilities, equity, revenues, expenses)
• Impact of business transactions on basic accounting information
• Financial statements

4. Implementing Accounting Analysis

• The Institutional Framework for Financial Reporting
• Factors Influencing Accounting Quality
• Steps in Performing Accounting Analysis
• Accounting Analysis Pitfalls
• Value of Accounting Data and Accounting Analysis
• Recasting Financial Statements
• Making Accounting Adjustments

5. Financial Analysis for Decision Making

• Comparative Analysis
• Ratio Analysis
• Cash Flow Analysis
• Profitability Analysis
• Credit Analysis
• Liquidity and Working Capital Analysis
• Analysis of Operating Activity of Liquidity
• Capital Structure
• Solvency Analysis

6. Prospective Analysis: Forecasting

• The Overall Structure of the Forecast
• Performance Behavior: A Starting Point
• Making Forecasts
• Sensitivity Analysis

7. Valuation Theory and Concepts

• The Discounted Dividend Valuation Method
• The Discounted Cash Flow Model
• The Discounted Abnormal Earnings Model
• The Discounted Abnormal Earnings Growth Model
• Valuation Using Price Multiples
• Shortcut Forms of Earnings-Based Valuation
• Comparing Valuation Methods

8. Valuation Implementation

• Detailed Forecasts of Performance
• Terminal Values
• Computing a Discount Rate
• Computing Equity Value
• Practical Issues in Valuation

9. Course Review

Lectures (3 hours per week)

The course offers a combination of lectures, case-studies presentations, class discussions and readings. A key feature of the course is the practical application of the academic theory and empirical evidence to real-world business cases.

The course is assessed through weekly sort assignments and the delivery of a group business analysis project (30%), and two examinations: one mid-semester examination (20%) and the final examination (50%).

Use of Information and Communication Technologies (ICTs) (e.g. power point) in teaching. The lectures for each chapter are uploaded on the e-class platform in the form of ppt files, which the enrolled students can freely download.