Corporate Financial Analysis

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Overview of the course O i   f th   Understanding the company Financial statements

Paperless, sustainable, eco‐friendly
 On UTS online:  all the readings are available in pdf format  all the lecture slides are available in pdf or pptx format  This saves you approx $140 AND you can use it on your 

iPad/reader/phone/laptop/PC (or print it out)?
 Does it make you more efficient?

Lecture 1 - Intro

2

How to do well in the class:
 Ensure you can do the “DO LIST” each week  The tutorial questions will be introduced during the  lecture at the point where the material is introduced  Try the tutorial questions before the tutorial y q  It is YOUR RESPONSIBILITY to try the question first and  come to the tutorial and be prepared to discuss the answer  The tutor will lead the discussion/ask questions and  comment on your answers  Answers will be discussed in the tutorial and will be posted  on UTS online  There are additional questions as well for each week with  solutions provided on UTS online Lecture 1 - Intro 3

1

Any emails to Dave
 MUST have the subject number in the subject line  25410  !!!  All general questions about content must be on UTS online  discussion board for everyone to see    “How do you calculate total asset turnover?”  “Where do you get the number 14 in tutorial 2?”  We cannot respond individually as this is simply unfair to  everyone else – everyone has to be treated equally so there is  fair disclosure (just like in the real world!)  Use the discussion board for discussion! Lecture 1 - Intro 4

provide an overview of financial reporting and financial statement analysis and ensure focus is from the perspective of finance

TW 1 Objectives

Corporate financial analysis overview

DO List
identify link between economic characteristics of an industry and a firm’s strategies, financial statements, profitability and market value create common size financial statements identify 3 tools to study economic characteristics of an industry identify purpose, underlying concepts and format of financial statements identify tools available for financial analysis of profitability and risk explain how an analyst might use financial statement information in the valuation of a firm discuss role of financial statement analysis in an efficient capital market identify sources of financial information for publicly traded firms

Check: have you ticked each item on the Do List you can do?
Lecture 1 - Intro 5

What is Financial Statement Analysis?
 Security Analysts  Use financial statements to value business firm  Predict future performance  Measure value of shares  Recommend buy/hold/sell  Focus of this course  Examine and value firms from the perspective of financial  analyst reporting to an interested party  The party may be interested in providing credit, assessing  performance, valuing the firm

Lecture 1 - Intro

6

2

5 Steps of Financial Statement Analysis
1.

Identify economic characteristics of an  industry Identify strategies that a firm pursues Assess quality of financial statements Analyse future profitability and risk Value the firm Lecture 1 - Intro 7

2. 2 3. 4. 5.

5 Steps of Financial Statement Analysis
1.

Identify economic characteristics of an industry
An overview of the P/L and B/S Common size statements Tools of analysing industry characteristics T l   f  l i  i d   h i i ‐ Value chain analysis ‐ Porters analysis ‐ Economic attributes 

Lecture 1 - Intro

8

1. Identify industry economic  characteristics
 Economic characteristics indicate what financial 

statement relationships are expected for companies in  that industry and what trends are present for that  company  Different industries have different expectations  Can create COMMON SIZE FINANCIAL STATEMENTS to 

compare firms
Lecture 1 - Intro 9

3

Balance Sheet
 What the Firm Owns  Current Assets  cash  accounts receivable  inventory ...
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