Handbook

Financial statement information is used in a wide range of business decisions. We will discuss financial statements from a user's perspective and use a variety of tools to break apart financial reports into meaningful units for analysis, to forecast financial statements, and to value a firm's shares. We will also look at the role of managerial incentives and accounting rules in assessing the quality of financial statements.

The course follows a structured approach to provide you with a set of analytical tools to become more effective users of financial statements. The course has the following structure: (1) Business Strategy Analysis - understanding the industry conditions a firm faces and its competitive positioning within the industry; (2) Accounting and Disclosure Analysis - understanding the extent to which the financial statements and non-financial information do a good or a bad job in reflecting the underlying economics of the business; (3) Financial Analysis - analysing recent performance using a ratio analysis in a systematic manner; (4) Prospective Analysis - making forecasts of future performance taking into account our first three analytical steps and incorporating those forecasts into a valuation model. We then use this 'toolbox' in a variety of contexts, including equity security analysis and credit analysis.