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Financial Reporting and Analysis

Module description

This module aims to provide you with a sound knowledge in financial reporting and financial statement analysis. The module provides a framework for guiding the financial statement analysis process. You will learn how to examine the past and current performance and financial position of a company in order to form expectations about its future performance and financial position. An examination of performance can include an assessment of a company’s profitability and its ability to generate positive cash flows as well as factors that affect risks to a company’s future performance and financial position.

Module aims - intentions of the module

The primary objective of this is to offer a comprehensive overview of the roles of financial reporting and financial statement analysis. It covers the significance of key financial statements—the statement of financial position, the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows—in evaluating a company's performance and financial position. The module empowers you to identify various information sources used by analysts in financial statement analysis beyond annual financial statements and supplementary information.

Financial analysis tools play a crucial role in assessing a company's performance and trends. The module delves into major considerations in both equity and credit analysis, emphasising the evaluation of a company's financial position, profit and cash flow generation, and potential growth. You will acquire the skills to utilise financial reports, combined with additional information, for evaluating past, current, and potential performance, aiding in investment, credit, and other economic decisions.

You will be able to answer key questions such as:

• How effectively has the company performed in comparison to its past and competitors?
• What is the company's likely future performance?
• Based on expectations about future performance, what is the value of this company or the securities it issues?

The module takes a user-centric approach, introducing essential knowledge of financial reporting mechanics. This perspective enables students to grasp critical concepts of financial analysis, including the use of ratios to evaluate corporate financial health. The module also explores how cash flow activities are reflected in the company's cash flow statement, addressing questions such as whether the company generates enough cash from operations to fund new investments or relies on new debt issuance for financing, and how dividends to common stockholders are funded—through cash generated from operations, asset sales, or debt issuance.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

• 1. Describe tools and techniques used in financial analysis, including their uses and limitations;
• 2. Describe the relationships among different financial statements;
• 3. Compare cash flows from operating, investing, and financing activities and classify cash flow items to each of these categories;
• 4. Explain a company’s strategy, and evaluate company financial performance;
• 5. Calculate and interpret financial ratios such as liquidity, solvency, leverage, coverage ratios etc.

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 6. Apply financial statement analysis in making investment decisions
• 7. Identify accounting warning signs and methods for detecting manipulation of information on financial reports

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 8. Develop a sound knowledge of reporting and accounting principles
• 9. Demonstrate the impact the external environment has on financial services, together with relevant best practice.

Syllabus plan

• Financial Reporting and Analysis: An Introduction
• Financial Reporting Mechanics and Standards
• Understanding Income Statements, Balance Sheets and Cash Flow Statements
• Financial Analysis Techniques
• Inventories, Long-Lived Assets, Income Taxes, Non-Current (Long-Term) Liabilities
• Financial Reporting Quality
• Financial Statement Analysis: Applications

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Re-assessment notes

Defer - as first time

Refer - capped at 40%

Indicative learning resources - Basic reading

Basic reading:

• Financial Reporting & Analysis, CFA® Program Curriculum Level I.

Key words search

Financial Reporting, Financial Analysis