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22319 Financial Statement Analysis (Capstone)

Warning: The information on this page is indicative. The subject outline for a particular semester, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

UTS: Business: Accounting
Credit points: 6 cp
Result type: Grade and marks

Requisite(s): 22420 Accounting Standards and Regulations AND 25300 Fundamentals of Business Finance
These requisites may not apply to students in certain courses.
There are course requisites for this subject. See access conditions.

Handbook description

The aim of this course is to demonstrate and apply a framework for business analysis and valuation using financial statement data. The emphasis of the course is on translating the tools of business analysis and valuation into practical situations. To achieve this, the course is relatively case intensive, with this method used to develop key skills as well as demonstrating their application. The course is intended for students interested in business consulting, investment banking, business analysis and corporate lending. Given the increasing trend towards a business analysis-based approach to auditing and assurance services, it is also relevant to those interested in public accounting.

Subject objectives/outcomes

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

  1. demonstrate the basic techniques of financial analysis and business valuation
  2. appraise the linkage between industry analysis, strategic business analysis, accounting analysis, financial analysis and prospective analysis
  3. explain how to use various different valuation models, as well as the benefits and limitations of those models.

This subject also contributes specifically to the following Program Learning Objectives (PLO):

  • show an understanding of essential concepts necessary for a career in business and related professions (PLO 1.1)
  • demonstrate inter-relationships between differing business and related disciplines (PLO 1.2)
  • critically evaluate data and resources in the context of relevant academic literature (PLO 2.2)
  • critically analyse and produce written disciplinary texts suitable for academic and/or professional audiences (PLO 3.1)
  • demonstrate work-ready disciplinary knowledge (PLO 5.1).

Contribution to course aims and graduate attributes

This course focuses on establishing a clear linkage between several skills normally acquired by business students so as to enable them to conduct rigorous business analysis and prepare sound business valuations. The course combines skills in business strategy, finance and accounting, so as to enable students to apply these methods of analysis in combination. It also contributes to the accounting major by demonstrating the analysis of accounting quality and its implications for financial analysis and valuation.

Content

  • Industry and strategy analysis: Understanding the strategic decisions businesses make to create/maximise shareholder value, as well as the constraints within which this occurs
  • Accounting analysis: Understanding the link between strategic considerations and the financial statements, including identification of the quality of accounting numbers
  • Financial analysis: Assessing the financial performance and position of a business using ratio analysis and cash flow analysis, in light of the strategic direction and accounting quality identified
  • Prospective analysis: Forecasting financial results
  • Prospective analysis: Valuation models — Understanding investment returns, and how valuation models are developed to anticipate abnormal returns
  • Prospective analysis: Valuation models — Implementation
  • Application: Using forecasted financial statements to develop a valuation, and the assessment of that value's sensitivity to strategic, accounting and financial considerations
  • Application: Mergers and acquisitions, credit analysis and distress prediction

Assessment

Assessment Item 1: Group Assignment Part 1 and 2

Objective(s): This addresses Subject Learning Objective/s: 1, 2, 3

Weighting: 20

Assessment Item 2: Individual Assignment

Objective(s):

This addresses Subject Learning Objective/s: 2
This addresses Program Learning Objective/s: PLO 1.1, 1.2, 2.2, 2.3, 3.1, 5.1
Weighting: 20

Assessment Item 3: Final Examination

Objective(s): This addresses Subject Learning Objective/s: 1, 3
Weighting: 60

Minimum requirements

Students must achieve at least 50% of the subject’s total marks.

Required texts

Palepu, K, Healy, P and Bernard, V (2013) Business Analysis and Valuation using Financial Statements: Text, 5th edn, Southwestern, Canada.

Faculty of Business: Guide to Writing Assignments, Faculty of Business, University of Technology, Sydney (accessed via the link below)

http://www.business.uts.edu.au/teaching/guide/guide.pdf

Recommended texts

Penman, S (any edition from 2004 onwards) Financial Statement Analysis and Security Valuation, McGraw Hill, New York.

References

The following text provides some extension to the main text: Palepu, K, Healy, P and Bernard, V (2008) Business Analysis and Valuation using Financial Statements: Text and Cases, 4th edn, Southwestern, Canada.