The aim of the module is to offer to students a detailed overview of the principles of financial accounting and reporting (i.e. disclosures to users of financial information for operating results; financial position and cash flows of a business entity) and utilise this in investment decisions. The essential function of financial statement analysis is often ignored due to companies’ numbers being viewed as a jargon in which it is difficult to assess how well an entity is performing. This course will deal with this misconception, by emphasizing information which is relevant in making investment, credit and possible valuation decisions. A user’s perspective, rather than a preparer’s is adopted, since most MBA and Master students will become users of financial statements rather than preparers. However, in order to become users, students must also understand how the financial statements are prepared. Therefore, the students’ attention will be directed towards thinking on the quality of earnings, and not just the reported numbers.
No prior knowledge of accounting and financial statement analysis is necessary. The core objectives of the module are to provide students with an understanding of:
- The information contained in the financial statements and the effects of economic events on them;
- The framework for making business decisions using information in financial statement; what choices can be made, what the options are, how can related data be used for various types of investment decisions.
Upon completion of the course, students will be able to:
- Understand the “language” of business, its uses and limitations;
- Interpret and understand the impact economic events have on the Balance Sheet, Income Statement, Statement of Changes in Equity and Statement of Cash Flows;
Use the information reported in Financial Statements for investment decisions.
