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1. Aims 1. Aims Document Transcript

  • Curtin Business School School of Accounting Accounting (Statement Analysis) 525 Unit Outline Semester 1, 2006 Unit Index Number 12466v4 Hours per Week 3 hours Weekly Tuition Pattern 3 hour seminar Credit Value 25 credits Pre-requisites Accounting (Financial) 510 Unit Controllers Rashid Desai Unit Controller’s office 407-427 Unit Controller’s email rashid.desai@cbs.curtin.edu.au Contact Telephone Numbers 9266 7779 School Telephone & Fax Numbers 9266 7295 (tel) or 9266 7196x (fax) Website for Unit Materials http://elearn.cbs.curtin.edu.au Student Consultation Times Available from the school office IMPORTANT NOTICE The Unit Outline (this document) gives the student important information about the unit, aims, outcomes, syllabus, materials, timetable, program and assessment. Note that important general information including policies, expectations, examinations, copyright, referencing, academic misconduct, assistance for communication skills, guidelines for assessment and CV development is available in the CBS Student Handbook. CRICOS provider code 00301J School of Accounting Page 1 of 10 updated on 31/05/05
  • 1. Aims......................................................................................................................................................................3 2. Outcomes...............................................................................................................................................................3 3. Syllabus.................................................................................................................................................................3 4. Materials................................................................................................................................................................4 5. Timetable of Classes.............................................................................................................................................5 6. Program.................................................................................................................................................................5 8. General Information..............................................................................................................................................9 9. Supplementary Instructions and Materials............................................................................................................9 9.2 Guidelines for Written Assignments...................................................................................................................9 School of Accounting Page 2 of 10 updated on 31/05/05
  • UNIT INFORMATION 1. Aims The aim of the unit is to provide a framework for using financial statement data in a variety of business analysis contexts. More specifically, this unit aims: 1. to introduce students to the essential concepts and tools of modern financial statement analysis; 2. to use these tools to analyse the profitability, risk and cash flows of a corporation; 3. to explore the theories of prospective analysis and valuation models and to apply these to a corporation; 2. Outcomes 2.1 Learning Outcomes On successful completion of this unit you should be able to 1. Explain the financial reporting environment 2. Discuss the impact of various stakeholders on the preparation of financial reports 3. Outline the process of financial analysis 4. Explain the impact of cash flows on business activities 5. Perform various financial analysis tasks 6. Perform prospective analysis 7. Apply various valuation models 2.2 Professional Skills Outcomes Employers worldwide want graduates who have developed effective professional skills. The CBS professional skills program includes communication (writing, interpersonal interactions and cultural awareness, and presenting), critical and creative thinking (problem solving and decision making), team work, IT literacy and information literacy. On successful completion of this unit you will be able to: 1. Manage time effectively, which involves meeting requirements set by others 2. Manage projects effectively, which involves the organization and co-ordination of group work 3. Recognise the need for information: this includes recognising that information is needed for a particular piece of assessment 4. Identify potential sources of information in a variety of formats: this includes being able to decide on the most appropriate sources of information from the range that are available 5. Develop appropriate search strategies: this includes the ability to think conceptually about the given topic and to be able to design and implement strategies for the location and selection of on-line and print information resources 6. Access the needed information: this includes the ability to save and print electronic information, and be familiar with the arrangement of print resources available 7. Identify problems and analyse the main features 8. Apply appropriate problem solving processes, arguments, critical and creative thinking 9. Communicate effectively in writing including writing tasks for the world of business. 3. Syllabus Theory, application and interpretation of accounting statement analysis. Objectives of financial statement analysis from the viewpoints of equity investors, management, acquisition and merger analysts, short and long term debt holders. School of Accounting Page 3 of 10 updated on 31/05/05
  • 4. Materials 4.1 Texts, References, Other Resources 4.2 Texts You must purchase: Palepu KG, Healy PM, Bernard VL; Business Analysis and Valuation: Using Financial Statements: Text and Cases; Thomson South-Western; 3 rd edn. ISBN 0-324-11894-5). NB: Please ensure that the text contains a copy of a CD referred to as the BAV Tool (Note: As this is an American text there are some differences in terminology and accounting standards to those used in Australia. Rather than regarding this as a problem, students should recognise this as an opportunity to learn something about accounting in other countries. This is also in keeping with our objective of providing an international dimension to the understanding and interpretation of financial statements). 4.3 References In addition to the set textbook(s) the following references will be useful: Clyde P. Stickney and Paul R. Brown, Financial Reporting and Statement Analysis: A Strategic Perspective, The Dryden Press, 4th edn, 1999. LA Bernstein & JJ Wild, Financial Statement Analysis, Irwin McGraw-Hill, 6th edn (1998) KG Palepu, VL Bernard & P Healy, Business Analysis and Valuation: Using Financial Statements, South-Western College Publishing, (1996) G White, AC Sondhi & D Fried, The Analysis and Use of Financial Statements, John Wiley & Sons, 2nd edn, (1998). Most of these references are available in the Library. (You should always use the latest edition of any text). 4.4 Other Resources The following link will take you to the Blackboard Login Page: http://elearn.cbs.curtin.edu.au Click on Login and wait to be directed to the Login Page Enter your Username: [your Student Number (eg 08716651)] and Password: [your Student PIN (University PIN 8 digits, ie date of birth)] and click Login to enter. If the unit does not appear on your Blackboard page you will need to complete the Online Teaching Student Access Request form http://www.cbs.curtin.edu.au/its/students/oll_request.cfm School of Accounting Page 4 of 10 updated on 31/05/05
  • If you have further problems please send an e-mail to CBSHelpdesk@cbs.curtin.edu.au detailing your problem. Remember to always include your Enrolled Student Name and Student Number in all communication so student enrolment can be verified. 5. Timetable of Classes Refer to website: http://www.cbs.curtin.edu.au for updates. 6. Program Legend: PHB Palepu Healy & Bernard (text book) DQ Discussion questions Ch Chapter reference Cs Cases p Page numbers Qs Questions Week Begin Seminar Pre- Tutorial Assessment Date readings Due 1. 27/2 Communicating with stakeholders and PHB Ch 13 Corporate governance What is corporate governance Communication with investors Financial reporting as a communication tool Other investor communication Auditor analysis Audit committees 2. 6/3 Framework for business analysis and valuation PHB Ch 1 Ch 13: Financial reporting and capital markets DQ 2, 4, 6, 7 Business activities translated to financial reports Analysing financial statements 3. 13/3 Equity security analysis PHB Ch 9 Ch 1: DQ 1, Investor objectives Cs: p 1-25 Qs 1 Analysis and market efficiency to 4 Fund management and analysis Comprehensive security analysis 4. 20/3 Business strategy analysis PHB Ch 2 Ch 9: DQ 2 Industry analysis Cs: p 9-26 Qs 1 to Competitive strategy analysis 3 Corporate strategy analysis 5. 27/3 Theory of accounting analysis PHB Ch 3 Ch 2: DQ 1, 5, 7 Institutional framework for financial and Ch 4 Cs: p 2-26 Qs 1 to reporting p 4-1 to 4-5, 5 Accounting quality 4-41 to 4-43 Steps in accounting analysis Problems with accounting analysis 6. 3/4 Financial analysis PHB Ch 5 Ch 3: DQ 2, 5, 6 Assignment 1 Ratio analysis Cs: p 3-20 Qs 1 to Due Cash flow analysis 3 School of Accounting Page 5 of 10 updated on 31/05/05
  • Week Begin Seminar Pre-readings Tutorial Assessment Date Due 7. 10/4 Corporate financing policies PHB Ch 12 Ch 5: DQ 1, 2, Determinants of debt policy 6, 9 Optimal debt/equity mix New project financing Determinants of dividend policy 8. 17/4 Tuition Free Week 9. 24/4 Tuition Free Week 10. 1/5 Preparing forecasts PHB Ch 6 Ch 12: DQ 1, Assignment 2 Relationship to other analyses 3, Due Techniques of forecasting Cs: p 16-29 Qs Making forecasts 1 and 2 Sensitivity analysis 11. 8/5 Valuation theory and concepts PHB Ch 7 Ch 6: DQ 1, 2, Value defined 4, 5 Discounted abnormal earnings model PE multiples and valuation The DCF model Comparing the models 12. 15/5 Valuation implementation PHB Ch 8 CH 7: 1, 6, 9 Forecasts of performance Cs: p 21-30 Qs Calculating a discount rate 1&2 Terminal values Calculating estimated values 13. 22/5 Course Overview & Evaluation Ch 8: Cs p 19- 29 Qs 1 & 2 14. 29/5 Assignment 3 Q&A 15. 5/6 Study Week Assignment 3 Due 16. 12/6 Exams: Week 1 17. 19/6 Exams: Week 2 The weekly tutorial questions will be used as a discussion forum to ensure that you understand the topic content. Students are therefore strongly advised to complete these questions prior to attending the class as you will be expected to make a significant contribution to the class discussion. School of Accounting Page 6 of 10 updated on 31/05/05
  • 7. Assessment 7.1 Summary To pass this unit you must: a) Receive an overall grade of 5 or above and a mark greater than or equal to 50, AND b) Submit all assessment activities No. Assessment Activity Percentage % 1 Assignment 1 25% 2 Assignment 2 35% 3 Assignment 3 40% Total 100% The assessments are due as per the Program above. 7.2 Assessment Details All three assignments are group assignments. Students will be assigned to a group in the first seminar (maximum group size 3, minimum of 2). Amazon.com Inc. will be used as the basis of analysis in all three assignments. The financial reports for Amazon.com can be found on pages 4-34 to 4-36 of the text. 7.2.1 Assignment 1 Briefly outline the history and major activities of Amazon.com. Research and document the characteristics of the industry(s) in which Amazon.com mainly operates, as well as the company strategy. You will need to obtain information from a variety of sources to complete this requirement (the internet as well as the financial press). Due Date: Week commencing 3 April To be handed in at the commencement of the seminar 2.2.1 Assignment 2 This assignment consists of three parts: 1. Import the financial reports of Amazon.com into the BAV software and recast into a standardised format. 2. Perform financial analysis using the BAV software. 3. Briefly explain the trend and possible reasons for changes to each of the ratios. Your assignment submission must include hard copy printouts of: a. the imported financial reports, b. the standardised reports, and c. the financial analysis worksheet Due Date: Week commencing 1 May To be handed in at the commencement of the seminar 7.2.3 Assignment 3 This assignment consists of two parts: 1. Prospective Analysis You are expected to develop and explain (based on your analysis in assignment 2 above) all the major assumptions that you will be using as inputs to the BAV software to facilitate your forecasts. Do not forget to carefully consider and explain your choice of forecast horizon. 2. Valuation School of Accounting Page 7 of 10 updated on 31/05/05
  • You are required to value the issued shares of Amazon.com using the BAV software. Explain all assumptions that you are required to make to facilitate this process (including assumptions about terminal values and discount rates). Note: Company market beta can be obtained from the internet. Your assignment submission must include hard copy printouts of: a. the pro-forma and valuation worksheets b. the valuation summary worksheet Due Date: 6June To be placed in the lecturer’s assignment box 7.3 Assessment Compliance Information Due dates will be strictly adhered to. Extensions will be granted only in cases of demonstrated urgent need. It is your responsibility to check the due date. Official release of results for this unit are published on Oasis on the Curtin website . https://prodweb3.curtin.edu.au/exrprd/results.search 7.4 Penalty for Late Submission of Assessments If assignments are not submitted by the due date, a penalty of 5% per day will be deducted from the assessment mark and after seven (7) days a zero mark will be recorded. It is the student’s responsibility to keep appropriate copies/backups of every assignment submitted. 7.5 Relationship of Assessment Activities to Learning Outcomes and Professional Skills This table illustrates how the assessment activities relate to the assessment of the learning outcomes and professional skills. Outcomes Assessment Activity Learning Outcomes Assignment 1 Assignment 2 Assignment 3 1. Identify and discuss the characteristics of  different industry sectors 2. Perform various accounting analysis tasks  3. Perform various financial analysis tasks  4. Discuss the impact of various stakeholders on  the preparation of financial reports 5. Explain the impact of cash flows on business  activities 6. Demonstrate the ability to find relevant    information 7. Identify major variables for the forecasting  process 8. Explain the outcomes of various valuation  techniques Professional Skills 1. Manage time effectively, which involves    meeting requirements set by others 2. Manage projects effectively, which involves    the organization and co-ordination of group work 3. Recognise the need for information: this    includes recognising that information is needed for a particular piece of assessment 4. Identify potential sources of information in a    variety of formats: this includes being able to School of Accounting Page 8 of 10 updated on 31/05/05
  • decide on the most appropriate sources of information from the range that are available 5. Develop appropriate search strategies: this    includes the ability to think conceptually about the given topic and to be able to design and implement strategies for the location and selection of on-line and print information resources 6. Access the needed information: this includes    the ability to save and print electronic information, and be familiar with the arrangement of print resources available 7. Identify problems and analyse the main    features 8. Apply appropriate problem solving processes,    arguments, critical and creative thinking 9. Communicate effectively in writing including    writing tasks for the world of business 8. General Information Please see the CBS Student Handbook as described on Page 1 of this document for important general information. 9. Supplementary Instructions and Materials 9.1 Conflict Resolution Processes for Group Assignments In the event of a conflict within Groups, students must undertake the following process prior to presenting their concerns to the Unit Controller: • Students must address issues early (do not leave the problem until the week before the assignment is due) • Call a meeting with all group members to discuss a concern • If resolution is not achieved, request mediation by another student within the class • If resolution is not achieved, request mediation by the tutor • If resolution is not achieved, present the concern to the Unit Controller • Students who are not prepared to work appropriately in teams will be required to undertake the full assignment individually and will be subject to loss of marks. 9.2 Guidelines for Written Assignments When preparing and writing your assignments, you should ensure that you follow these requirements. • The assignments must be typed on A4 paper with 1 line spacing (single spacing) and a 2.5cm margin at the top, bottom and right hand side to allow for marker's comments. Headings should be used to identify the main points in your argument. Headings should be well spaced and underlined. • Your assignments should be grammatically correct and well punctuated. As university students, a high standard of written English is expected. Your assignments should be clear, concise, neatly presented and easy to read. Failure to comply with these requirements may result in a significant loss of marks. • Your assignments must be original pieces of work written by you and not submitted for assessment purposes for any program of study at this or any other tertiary institution. • Your assignment should be submitted to your lecturer by the start of class in the week specified. If you require an extension of time, it is your responsibility to contact your lecturer before the due date. • Assignments submitted after the due date will be subject to the penalties described 7.4 above. Backdated medical certificates are not acceptable, except in extreme cases and then only at the School of Accounting Page 9 of 10 updated on 31/05/05
  • discretion of the unit controller. Work, personal and/or family commitments are generally not sufficient cause in themselves for any special consideration or extension. If you are in doubt about any of these requirements, contact the unit controller well in advance of the due date. END OF UNIT INFORMATION School of Accounting Page 10 of 10 updated on 31/05/05