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2023/2024  KAN-CFIAO1004U  Financial statement Analysis

English Title
Financial statement Analysis

Course information
Language English
Course ECTS 7.5 ECTS
Type Mandatory (also offered as elective)
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for cand.merc. and CFIA (CFIA)
Course coordinator
  • Yanlei Zhang - Department of Accounting (AA)
Main academic disciplines
  • Accounting
Teaching methods
  • Blended learning
Last updated on 02-06-2023

Relevant links
Learning objectives
The aim of the course is to enable students to analyze a firm’s profitability, growth and risks, calculate and interpret financial ratios that describe a firm’s financial situation and demonstrate the ability to value firms using different valuation techniques. Students should also be able to perform a credit analysis and assess accounting-based bonus. Finally, students should understand that the quality of accounting information may limit the quality of financial analyses and decision making. Upon completion of the course the student should therefore be able to:
  • read and understand a financial statements
  • conduct a profitability analysis using financial ratios
  • conduct a growth analysis using financial ratios
  • conduct a liquidity risk analysis using financial ratios
  • prepare pro forma statements for forecasting
  • estimate firm values
  • perform a credit analysis
  • assess accounting-based bonus plans
  • understand the concept of accounting quality
Examination
Financial Statement Analysis:
Exam ECTS 7,5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Winter
Aids Limited aids, see the list below:
The student is allowed to bring
  • USB key for uploading of notes, books and compendiums in a non-executable format (no applications, application fragments, IT tools etc.)
  • Any calculator
  • In Paper format: Books (including translation dictionaries), compendiums and notes
The student will have access to
  • Access to Canvas
  • Advanced IT application package
Make-up exam/re-exam
Same examination form as the ordinary exam
The number of registered candidates for the make-up examination/re-take examination may warrant that it most appropriately be held as an oral examination. The programme office will inform the students if the make-up examination/re-take examination instead is held as an oral examination including a second examiner or external examiner.
Course content, structure and pedagogical approach

The first part of the course focuses on refreshing students’ knowledge of basic financial accounting and financial statements including the income statement, balance sheet, statement of changes in owners’ equity and cash flow statement. The first part also addresses the conceptual differences between accrual and cash flow based accounting. After completing the first part the student should be able to read and understand financial statements.
 
The second part of this course focuses on approaches to measure profitability. Key financial ratios like return on invested capital (ROIC) and Economic Value Added (EVA) are defined and analysed. After completing the second part the student should be able to conduct a ratio analysis measuring the profitability of a firm. Furthermore, the student should be able to compare different firms’ profitability.
 
The third part of this course focuses on different ways to measure growth and understand that growth is not necessarily beneficial. After completing the third part, students should be able to analyse growth and understand which kind of growth is beneficial for company value.
 

The forth part of this course is about liquidity risk analysis. We will analyze liqudity risk from different perspectives, such as capital strucutre, cash flow from operations, and short-term liqudity risk. We will also analyze the consequnce of liqudity constraints.


The fifth part of the course focuses on forecasting. It is about how to technically develop the pro forma statements. After completing this part of the course, students should be able to develop pro forma statements based on forecasting assumptions.


The sixth part of the course focuses on firm valuation. Different valuation approaches are introduced and the strengths and weaknesses of each approach are discussed. After completing the fifth and this part, students should be able to estimate the value of a firm.

 

The seventh part of the course is about credit analysis. Different techniques including ratio analysis and forecasting are introduced with the purpose of assessing a firm’s credit worthiness and the risk of default. The advantages of each approach are highlighted.

 

In the end, we will highlight the importance of accounting information quality, accounting flexibility. We will also introduce the common form of earnings management.  
Description of the teaching methods
Lectures with exercises and workshops.
Feedback during the teaching period
Feedback will be provided during the exercises sessions and the live workshops. Exercise sessions entail feedback to students who have prepared solutions at home.
Students can check the instructor's solution and the explanations. During the live workshops, students are encouraged to participation into the discussion, and feedback is continuously provided by the instructor and by the classmates.
Student workload
Lectures 33 hours
Preparation for lectures 66 hours
Exercise classes 28 hours
Preparation for exercise classes 70 hours
Exam 4 hours
Final preparation for exam 19 hours
Expected literature

Two options of the textbook:

 

(1) Thomas Plenborg and Finn Kinserdal, Financial Statement Analysis, 2nd edition, Fagbokforlaget, 2020, ISBN: 9788245034240

 

(2) Christian Petersen, Thomas Plenborg, and Finn Kinserdal, Financial Statement Analysis, 1st edition, Fagbokforlaget, 2017, ISBN: 9788245021028
Last updated on 02-06-2023