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Financial Statement Analysis and Security Valuation (B-KUL-D0R87A)

6 ECTSEnglish39 First term
Verriest Arnt
OC Toegepaste economische wetenschappen FEB Campus Leuven

Aims

This course provides an overview of financial analysis concepts and practices. The main objective of the course is to learn students how to read, analyze, and interpret financial reports and financial accounting data to make informed business and valuation decisions. A first purpose is for students to learn how to analyze financial statements, including a firm’s balance sheet, income statement, cash flow statement, equity statement and disclosure notes. Students learn how to analyze a firm’s profitability, liquidity and solvency position. Next, students will learn how to extract information from financial reports and disclosures on a firm's financial performance, its creditworthiness, its likelihood of bankruptcy and liquidity problems. Students will learn how to interpret and analyze complex but relevant operating items from a firm’s balance sheet and income statement including revenues, R&D, tax items and goodwill. The second purpose of this course is to show students how they can use and transform financial information and accounting inputs in order to value firms through various techniques.

 
After completing this course, the student should be able:

  • to understand the economic interpretation behind the numbers shown in financial statements
  • to understand and being able to critically evaluate various valuation techniques
  • to understand how business activities (operations, investing, financing) are depicted through stocks and flows in the financial statements 
  • to analyze financial statements in a detailed and coherent fashion. Specifically, being able to analyze in-depth a firm’s profitability, liquidity and solvency position.
  • to infer profitability and growth from the reformulated financial statements
  • to convert forecasts into a valuation, using accrual-based accounting valuation models
  • to decide on the quality of financial statements
  • to interpret new models and to develop a critical scientific attitude towards research in this domain

Previous knowledge

The student should meet the criteria for the program. Students should have a basic knowledge of financial statements, ratios and technical accounting (bookkeeping).

Is included in these courses of study

Activities

6 ects. Financial Statement Analysis and Security Valuation (B-KUL-D0R87a)

6 ECTSEnglishFormat: Lecture39 First term
Verriest Arnt
OC Toegepaste economische wetenschappen FEB Campus Leuven

Content

  • Understanding the firm’s key financial statements: balance sheet, income statement, cash flow statement, equity statement and statement of comprehensive income
  • Detailed analysis of profitability
  • Advanced credit risk analysis, bankruptcy prediction and financial distress analysis
  • Advanced liquidity analysis
  • In-depth analysis of revenues and operating expenses
  • In-depth analysis of operating assets and liabilities
  • Reformulation of the financial statements for valuation purposes
  • Forecasting financial statements and estimating valuation inputs
  • Understanding and applying cash-flow based valuation models, residual income valuation models, and executing valuation multiples
  • Accounting earnings versus economic earnings
  • Analysis of the quality of financial statements
  • Understanding fraud accounting

Course material

Textbook:

  • Easton, McAnally, Sommers, Zhang
  • Title: Financial Statement Analysis and Valuation
  • Publisher: Cambridge Business Publishers
  • Version: Fifth edition (2018)

Academic papers (made available on Blackboard).

Toledo/Blackboard with papers, journal articles, annual reports, financial disclosures and exercises

Format: more information

* Students have to prepare some of the lectures by reading and summarizing research papers. These papers will be discussed during the lectures together with exercises and case studies. 

Evaluation

Evaluation: Financial Statement Analysis and Security Valuation (B-KUL-D2R87a)

Type : Exam during the examination period
Description of evaluation : Written
Type of questions : Closed questions, Open questions
Learning material : List of formulas, Calculator

Explanation


Features of the evaluation

The final exam is a written, closed book exam. Students can use a calculator and a formulary (students have to bring their own copy to the exam).

Determination of final grades

* The grades are determined by the lecturer as communicated in class and via Toledo, and stated in the examination schedule. The result is calculated and communicated as a whole number on a scale of 20.
* The final exam accounts for 100 % of the final grade.

Information about retaking exams

Second examination opportunity

* The features of the evaluation and determination of grades are similar to those of the first examination opportunity.