25743 Corporate Financial Analysis

Subject level: Postgraduate

Handbook description

This subject develops students' abilities to conduct corporate financial analysis both for lending and investment purposes. Students are able to reconstruct cash flow statements from other financial statements, analyse reasons for corporate failure and project financial statements.

Subject objectives/outcomes

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

1. Comprehend the latest developments in corporate financial analysis and develop skills necessary to assess a variety of financial information for lending and investment purposes.
2. Analyse reasons for corporate failure, using topical case studies.
3. Understand the necessity to reconstruct cash flow statements from other financial statements in order to assess cash solvency, cash inadequacy and hence the proficiency of the company's ability to manage liquidity.
4. Understand that many of the traditional tools of corporate financial statement analysis fail to reveal the true condition of the company due to the fundamental nature of accounting.
5. Analyse which ratios and techniques of analysis to use, as well as the limitations of fundamental analysis from a statistical and theoretical viewpoint.
6. Apply techniques to project cash flows for use in valuation methodologies.

Contribution to graduate profile

To develop students' abilities to conduct corporate financial analysis both for lending and investment purposes. Students will be able to reconstruct cash flow statements from other financial statements, analyse reasons for corporate failure and which financial factors are crucial. Students will also be able to project cash flows for use in valuation methodologies.

Teaching and learning strategies

The subject will be taught using a combination of lectures and workshops. These classes will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTS Online) will be used to share information and encourage interaction between staff and students. Students will also use appropriate computer software such as spreadsheets and word processors to complete assigned tasks.

Content

• Analysis of financial statements and information
• Cross sectional and time series analysis of financial information, leading to the development of ratio analysis
• Foundations of Liquidity Analysis - Analysis of the Operating Cash Cycle, Economic Fundamentals for Analysis of Liquidity, Cash Flow Analysis, Liquidity Indicators, Analysis of the Management of Liquidity Statements
• Use of Financial information in solvency analysis, leading to rating and distress prediction methods
• Forecasting and valuation using financial statement information.

Recommended text(s)

Wild, Bernstein and Subramanyam, (2001), Financial Statement Analysis, 7ed., McGraw-Hill, Irwin.

Indicative references

Ball, R., Kothari, S.P., (1994), Financial Statement Analysis, McGraw-Hill

Fridson, M.S., (1995), Financial Statement Analysis-A Practitioner's Guide, 2nd ed., Wiley.

Foster, G., (1986), Financial Statement Analysis, Prentice-Hall

Gallinger, G. W. and Healey, P. B., (1991), Liquidity Analysis and Management, Addison and Wesley

Helfert, E.A., (1994), Techniques of Financial Analysis, 8th ed., Irwin

Higgins, R.C., (1994), Analysis for Financial Management, 4th ed., Irwin

Palepu, K.G., Bernard, V.L., and Healy, P.M., (1996), Business Analysis and Valuation Using Financial Statements, South-Western Publishing

Schilit, H.M., (1993), Financial Shenanigans, McGraw-Hill

Stickney, C. P., (1998), Financial Statement Analysis: A strategic perspective, Dryden.