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Unit information: Financial Statement Analysis in 2018/19

Please note: It is possible that the information shown for future academic years may change due to developments in the relevant academic field. Optional unit availability varies depending on both staffing and student choice.

Unit name Financial Statement Analysis
Unit code EFIM30025
Credit points 10
Level of study H/6
Teaching block(s) Teaching Block 2 (weeks 13 - 24)
Unit director Dr. Ruby Trinh
Open unit status Not open
Pre-requisites

Financial Accounting EFIM20007

Co-requisites

N/A

School/department School of Economics, Finance and Management
Faculty Faculty of Social Sciences and Law

Description

This unit aims to demonstrate how financial statements can be reformulated and analysed to value company securities and to evaluate company financial performance and position. It draws on theoretical and empirical research to derive and evaluate equity and firm valuation models based on financial reporting information and examines how accounting information is used to assess and manage credit risk.

Intended learning outcomes

On successful completion of this unit a student will be able to:

  • Show a systematic knowledge of how financial reporting information can be used in fundamental valuation models.
  • Show a systematic knowledge of the empirical research into the relationship between financial reporting data and stock market data.
  • Distinguish between operating and financing items in financial reporting information and reformulate financial statements to report both.
  • Discuss how financial reporting information can be used in the analysis of credit risk.
  • Understand how to assess the quality of financial reporting information using measures developed in the empirical accounting literature.
  • Discuss the implications of the efficient markets hypothesis for the analysis of financial reporting information.
  • Solve problems, including the ability to manipulate financial and other numerical data and to apply statistical concepts at an appropriate level.
  • Exercise powers of inquiry, logic, and critical analysis, interpretation and evaluation of arguments and evidence.
  • Sustain a critical argument in writing.
  • Evaluate and apply financial ratios to assess company performance.
  • Use various types of financial reporting information as inputs to fundamental accounting valuation models.
  • Communicate ideas, principles and theories effectively by oral and written means.

Exercise initiative, self reliance and time management skills and work independently.

Teaching details

10 hours of lectures; 5 hours of classes

This pattern of teaching may be changed slightly to accommodate the Easter Vacation.

Assessment Details

Formative: Students do group presentations and hand in their answers for tutorial sets.

Summative: 100% 1.5 hour exam

All learning objectives are assessed by both summative and formative assessment.

Reading and References

Penman, S.H. (2012) Financial Statement Analysis and Security Valuation (5th edition), McGraw Hill.

Barker, R. (2001) Determining Value FT Prentice Hall.

Indicative journal articles:

Francis, J., Olsson, P. and Oswald, D. (2000) “Comparing the accuracy and explainability of dividends, free cash flow and abnormal earnings equity value estimates” Journal of Accounting Research 38(1), pp. 45-70.

Ohlson, J. (1980) “Financial Ratios and the Probabilistic Prediction of Bankruptcy” Journal of Accounting Research, 18(1) pp. 109-131.

Ohlson, J. (1995) “Earnings, book value and dividends in equity valuation” Contemporary Accounting Research 11(2), pp. 661-687.

Penman, S. and Sougiannis, T. (1998) “A comparison of dividend, cash flow and earnings approaches to equity valuation” Contemporary Accounting Research 15(3), pp. 343-383.

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