Checking date: 01/07/2020

Course: 2020/2021

Financial statement analysis
Study: Master in Finance (261)

Coordinating teacher: GARCIA OSMA, BEATRIZ

Department assigned to the subject: Department of Business Administration

Type: Compulsory
ECTS Credits: 3.0 ECTS


Students are expected to have completed
- Students are expected to have completed previous Accounting courses (during the Master), including Financial Accounting. - Cases will be solved using Excel.
Competences and skills that will be acquired and learning results.
Learn how to analyze financial statements and to rate and value companies. From the user perspective, the course develops a framework for business analysis and valuation that can be applied to multiple decision contexts. Two main parts are identified: (1) Fundamental Analysis (analysis of corporate strategy and industry analysis, analysis of earnings quality, profitability and ratio analysis, bankruptcy detection, etc.), and (2) Prospective Analysis (forecasting and valuation).
Description of contents: programme
1. Framework 1.1. The role of financial reporting in capital markets 1.2. Influence of the accounting system on information quality 1.3. Alternative forms of communication with investors 1.4. From financial statements to business analysis 2. Strategy analysis 2.1. Industry analysis 2.2. Competitive strategy analysis 2.3. Corporate strategy analysis 3. Accounting analysis (Part I) 3.1. Factors influencing accounting quality (Accounting rules, managers¿ accounting choices) 3.2. Steps in accounting analysis 3.3. Recasting financial statements 3.4. Accounting analysis pitfalls 4. Accounting Analysis: Implementation (Part II) 4.1. Recognition of assets, liabilities, and equity 4.2. Asset, liability, and equity distortions 5. Financial analysis 5.1. Ratio analysis (Measuring profitability, decomposing profitability, assessing operating management (profit margins), evaluating investment and financial management). 5.2. Assessing sustainable growth 5.3. Cash flow analysis 6. Prospective analysis: Forecasting (Part I) 6.1. Structure of the forecast 6.2. Performance behavior 6.3. Forecasting assumptions 6.4. From assumptions to forecasts 7. Prospective analysis: Valuation (Part II) 7.1. Defining value for shareholders 7.2. The DCF model 7.3. Valuation using multiples 7.4. Comparing valuation methods 7.5. Valuation implementation
Learning activities and methodology
Learning activities include lectures where both theory and practical cases will be presented and discussed. Lecture notes, readings (chapters from recommended books and articles) and case materials will be posted before class. Each week has a folder with case materials. After class, students will work in groups on the solution of these cases and submit their solutions through Aula Global (following the lecturer¿s instructions). The solutions will be discussed in class afterwards.
Assessment System
  • % end-of-term-examination 50
  • % of continuous assessment (assigments, laboratory, practicals...) 50
Basic Bibliography
  • Palepu, K.G., Healy, P.M., and Peek, E.. Business Analysis and Valuation: IFRS Edition. Cengage Learning. 2019

The course syllabus and the academic weekly planning may change due academic events or other reasons.