Course 2021-2022 a.y.


Department of Accounting

Course taught in English
Go to class group/s: 31
CLMG (6 credits - II sem. - OP  |  12 credits SECS-P/07) - M (6 credits - II sem. - OP  |  SECS-P/07) - IM (6 credits - II sem. - OP  |  SECS-P/07) - MM (6 credits - II sem. - OP  |  SECS-P/07) - AFC (6 credits - II sem. - OP  |  SECS-P/07) - CLELI (6 credits - II sem. - OP  |  SECS-P/07) - ACME (6 credits - II sem. - OP  |  SECS-P/07) - DES-ESS (6 credits - II sem. - OP  |  SECS-P/07) - EMIT (6 credits - II sem. - OP  |  SECS-P/07) - GIO (6 credits - II sem. - OP  |  SECS-P/07) - DSBA (6 credits - II sem. - OP  |  SECS-P/07) - PPA (6 credits - II sem. - OP  |  SECS-P/07) - FIN (6 credits - II sem. - OP  |  SECS-P/07)
Course Director:

Classes: 31 (II sem.)

Suggested background knowledge

To feel comfortable in this course, you should be familiar with financial accounting and financial statement analysis (basic), corporate finance and business valuation (basic).

Mission & Content Summary


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 (using a Monte Carlo simulation).
  • FSA for a listed group of companies: A Comprehensive Case Study.
  • Fraud Analysis: how to identify the "red flags" through FSA; Case Study.

Intended Learning Outcomes (ILO)


At the end of the course student will be able to...
  • 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.


At the end of the course student will be able to...
  • 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 the cash flow statement and related reformulations and ratios.

Teaching methods

  • Face-to-face lectures
  • Exercises (exercises, database, software etc.)
  • Case studies /Incidents (traditional, online)


During the course teachers will present several incidents and case studies that are all based on real companies.

Exercises and quantitative examples will also be presented by the teachers.


Because of the professional approach of this course, we will work together in classroom to
analyze some incidents and case studies
. So that you can understand how the teachers
approach a specific problem. Therefore no group/individual assignments are required.

Assessment methods

  Continuous assessment Partial exams General exam
  • Written individual exam (traditional/online)


The final exam (written) comprises exercises (ex. reformulation of cash flow statement, calculation of some ratios etc.), multiple choice (answers: numbers or sentences) and matching questions.

The exam is specifically focused on the technical topics of financial statament analysis.

It lasts approximately 1 hour and 15 minutes.

The exam is based on the following structure:


Type of Questions


Qualitative / Quantitative


2 Exercises about the preparation of some cash flows (Fill in Multiple Blanks Questions)

Since the preparation of a full reformulated cash flow statement is impracticable, I will prepare 2 exercises on some limited “portions” of the cash flow statement

For each exercise it is required to calculate and digit 2 numerical results in special “answers boxes”. I will select two of the followings:

  1. Calculate the 2 components of the Operating Cash Flows (EBITDA and change in NOWC)
  2. Calculate 2 cash flows for CAPEX transactions
  3. Calculate 2 cash flows for financial assets transactions
  4. Calculate 2 cash flows for financial liabilities transactions
  5. Calculate 2 cash flows for transactions with shareholders

Quantitative (numerical answers)

Since you have to digit the result in a special box, the exercise will clarify how to digit the numbers, i.e. how to write the thousand separator and the negative numbers (there are no decimals)

4 points each exercise (partial credit of 2 points for each numerical result) - TOTAL: 8 points

6 Matching questions

You have to pair items in one column (question items) to items in another column (answer items); the number of items in each column can not to be equal because it is possible to reuse some answers and there can be unmatched answer choices

Qualitative (definitions and concepts)

1 points each question (partial credit according to the correct pairings) – TOTAL: 6 points

4 Multiple Choice questions


Only one correct answer (4 or 5 possible choices)

Quantitative (numerical answer)

2 points each question (no partial credit) – TOTAL: 8 points

9 Multiple Choice questions

Only one correct answer (4 possible choices)

Qualitative (definitions and concepts)

2 of the 9 questions are about the Prof. Borré classes

1 point each question (no partial credit) – TOTAL: 9 points


Teaching materials


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) are available at the beginning of the course: students are required to study these basic materials before lectures.


Suggested (but not required) Textbooks:

  • Stephen H. Penman, Financial Statement Analysis and Security Valuation, 5/e, 2013
  • Thomas R. Robinson, Elaine Henry, Wendy L. Pirie, Michael A. Broihahn, International Financial Statement Analysis, CFA Institute, WILEY, 3/e, 2015.


Last change 22/12/2021 16:05