22816 Financial Analysis and Business Valuations

Subject level: Postgraduate

Handbook description

This subject explores the latest developments in accounting methods and practices used to analyse and value business operations. It examines the information content of financial statements and how this information, coupled with global, industry and company-specific financial data, aids in the development of models to predict future profits and cash flows. These models are then applied in the context of corporate restructuring, acquisition and mergers, private equity considerations, bankruptcy predictions and fundamental equity valuations. Students are required to evaluate and apply valuation techniques based on pre-configured computer-based spreadsheet valuation templates.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Evaluate the impact of global and national socio-economic and technological trends on the financial performance of companies.
2. Analyse financial statements and develop key indicators.
3. Develop alternative financial models to predict future profit and loss statements, balance sheets, cash flow and future performance.
4. Develop and apply different valuation models which are based on accounting numbers or cash flows.
5. Apply the above technical skills to corporate failure prediction, corporate restructuring, acquisitions and mergers, private equity considerations, corporate risk assessment and fundamental equity analysis.

Contribution to graduate profile

This subject explores the latest developments in accounting methods and practices used to analyse and value business operations. Financial analysis requires the application of a diverse body of knowledge including accounting, finance, marketing and economics, for the development of accounting information to support management decisions and help students to develop critical problem-solving skills in a realistic corporate setting. This subject will develop and apply alternative business valuation models and demonstrate how the value determined is a result of the interaction between the financial, socio-economic and technological factors existing in the marketplace. The practical case studies prepare students to apply skills acquired in the subject in their work place.

Teaching and learning strategies

The subject is taught in lecture and seminar format. Students will be required to participate in classroom discussion, solve homework problems and undertake small case studies. It is expected that students will attempt all case studies and homework problems as worked solutions to these will not be handed out, but students will have a chance to correct all their homework during the seminars. Students will have a major syndicate case study and will receive a free valuation spreadsheet to help them solve this syndicate case study.

Content

• Review of financial statements
• How and why to restate financial statements
• The global socio-economic, financial and technological trends
• Industry analysis using financial information
• Accounting quality analysis and creative accounting
• Financial ratio analysis and other key performance indicators
• Alternative predictive models of financial statements
• Alternative valuation models based on predicted balance sheets, profit and loss statements and cash flows
• Applications of financial analysis techniques to prediction of corporate failure and corporate restructuring, acquisitions, mergers and private equity, fundamental analysis and equity valuations
• Corporate governance and financial statements

Assessment

Recommended text(s)

Palepu, K., Healy, P. and Bernard, V. (2004) Business Analysis and Valuation: Using Financial Statements; Text and Cases; Second Edition, South Western

Indicative references

A course pack of selected articles will be distributed.

Penman, S.H., (2006) Financial Statement Analysis and Security Valuation, McGraw Hill

White, G.I., Shondi, A.C. and Fried, D. (2003) The Analysis and Use of Financial Statements, Third Edition, Wiley