This course aims to demonstrate how financial statements can be reformulated, analyzed and interpreted for decision making. It first identifies information sources that analysts frequently employ in financial statement analysis and examines the steps of the financial statement analysis framework. It then discusses the objective of financial reporting and how financial reporting standards affect security analysis and valuation. The course will cover important tools and techniques used in financial analysis including activity, liquidity, solvency, profitability and valuation ratios, describe the relationships among those ratios and evaluate real life companies using ratio analysis. It also demonstrates the application of DuPont analysis of return on equity, and other ratios especially used in equity analysis and credit analysis. Finally, it provides a framework for considering potential analyst adjustments that are necessary when comparing companies that use different accounting methods or estimates.

CILO-1: Describe the roles of financial reporting and financial statement analysis, the implications of financial analysis of alternative financial reporting systems and the importance of monitoring developments in financial reporting standards. CILO-2: Critically apply the tools and techniques used in financial analysis, including their uses and limitations. CILO-3: Calculate the activity, liquidity, solvency, profitability and valuation ratios. CILO-4: Calculate ratios specifically used in equity analysis and credit analysis. CILO-5: Assess appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company adopting different accounting methods, estimates and/or principles.