20221 - FINANCIAL STATEMENTS ANALYSIS (ADVANCED COURSE)
Course taught in English
Go to class group/s: 31
To feel comfortable in this course, you should be familiar with financial accounting and financial statement analysis (basic), corporate finance and business valuation (basic).
The course major educational objective is the analysis of financial statement interpretation issues from the perspective of professional analysts in an international context. Successful completion of this course enable students to use financial analysis formats and ratios in the perspective of industry and competitor analysis, credit analysis, equity analysis and (fraud) audit analysis. Particular relevance is given to analysis and discussion of problems, incidents and case studies for real-world companies, in order to develop students' skills in identifying critical financial statement areas.
Main topics are:
- Introduction to Financial Statements Analysis (FSA).
- Analysis of Income Statement: overall reformulation choices; core vs. non-core operating income.
- (cont.) Unusual items and Recurring/Persistent Earnings.
- (cont.) Focus on operating income and EBITDA.
- Analysis of Balance Sheet: from the liquidity format to the managerial format.
- (cont.) Managerial format: reformulation options and ratios; alternatives to measure the financial indebtness.
- The ratio system: analysis of ROI (return on investment): correlation of working capital and CAPEX to sales revenues.
- The ratios system: analysis of ROE (return on equity): from the financial leverage to the operating liabilities leverage.
- Analysis of the Cash Flow Statement: the Standard Cash Flow Statement according to IFRS (IAS 7).
- (cont.) Analysis of the Cash Flow Statement: reformulations and ratios.
- (cont.) Empirical Research on Cash Flow Ratios and Drivers.
- The influence of Accounting Principles (IFRS vs Local GAAP) on FSA.
- Industry, strategic analysis and FSA: linkage between financials and KPIs; how to apply a sensitivity analysis.
- FSA for a listed group of companies; Case Study.
- FSA and financial forecasts in the perspective of credit and equity analysis; preparation and evaluation of the reasonableness of financial forecasts and sensitivity analysis; Case Study.
- Fraud Analysis: how to identify the "red flags" through FSA; Case Study.
- Understand what discretionary choices an analyst has to make in order to assess the financial statements (and the related reformulations and ratios) coherently with the objectives of the financial analysis (decision-making process).
- Understand the definitions and measurement options underlying the concept of core operating income and unusual items in order to measure the persistent income-based results.
- Understand the relevant alternatives for the analysis of the profitability.
- Understand the relevant choices in order to prepare and analyze the cash flow statement and the relevant cash-based ratios.
- Understand how to approach the analysis of the relationships between financials and KPIs.
- Define and measure the core operating income and the related ratios.
- Define and measure the unusual items in order to analyze the persistent or recurring income.
- Define and measure all the ratios that are commonly used in professional practice.
- Prepare and analyze several formats of cash flow statement and related ratios.
- Face-to-face lectures
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
During the course teachers will present several examples, incidents and case studies that are all based on real companies.
|Continuous assessment||Partial exams||General exam|
The final exam (written) comprises exercises (ex. reformulation of cash flow statement, calculation of some ratios etc.), multiple choice (answers: numbers or sentences) and true/false questions. The exam is specifically focused on the technical topics of financial statament analysis. It lasts approximately 1 hour and 15 minutes.
Available on the course website:
- Slides (required).
- Short readings (required).
- Exercises and questions grouped by topic (required).
- Supplemental professional and academic readings (optional, not required for the final exam).
For some topics (ex. cash flow statement preparation): basic materials (slides + exercises); students are required to study these basic materials before lectures.