Department of Finance Faculty of Business, Economics and Law

Financial Statement Analysis FIN5FSA

Subject Learning Guide (Extended Version)

Semester 1 2013 Bundoora Subject Coordinator: Judy Taylor Instance Coordinator: JudyTaylor

ENQUIRIES Judy Taylor Lecturer and Coordinator La Trobe University Victoria 3083

T 03 9479 <<5706>> F 03 9479 <<5706>> E Judith.taylor@latrobe.edu.au latrobe.edu.au

Subject Details
GENERAL DETAILS Subject Code: Teaching Period: Credit Points: FIN5FSA Semster 1 15 Subject Title: Location(s): Mode: Financial Statement Analysis ELT 6 Lecture level 1

ENROLMENT REQUIREMENTS Prerequisites: Co-requisites: Assumed Skills & Knowledge: NIL NIL

Students should be competent in the basics of accounting, proof of which will be a pass grade in the La Trobe University Subject ACC5AFM: Accounting for Managers, or a pass grade in an equivalent Subject at another university.
Students should be able to open, save and navigate around a Microsoft Excel spreadsheet, as well as enter and format data and simple formulas using =+-*/ operators.

Special Study Requirements:

An Australian bachelor degree with a C grade average in the final year, or a degree determined to be equivalent by La Trobe University
An IELTS average score of 6.5, with no band score less than 6.

STAFF CONTACTS Subject Coordinator: Email: Location: judith.taylor@latrobe.edu.au DWB 437 Dr Judy Taylor Tel: 94795706 Dr Judy Taylor Tel: 94795706

Instance Coordinator: Email: Location: judith.taylor@latrobe.edu.au DWB 437

SUBJECT DESCRIPTION

This Subject aims to present financial statement analysis from the point of view of the primary users: equity and credit analysts. The Subject provides students with an understanding of how financial statements are constructed in order to separate the economic process that generates the numbers from the accounting process that at times obfuscates them. Each topic is focussed on a specific area of analysis, and the effect of differences in accounting methods and estimates on reported financial conditions, results of operations and financial ratios is highlighted. International accounting differences are discussed and relevant empirical research findings are considered)
SUBJECT INTENDED LEARNING OUTCOMES (SILOS) Upon successful completion of this subject, you should be able to: 1

To analyse the differences which exist between accounting standards and their application in different countries, in particular the difference between US GAAP and IASB GAAP; To develop an understanding of the accounting, financial and economic theory on which the practice of financial analysis is founded;

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To develop the practical skills required to deconstruct a companys financial statements so as to restate the accounts on a comparable basis with the accounts of other companies; To develop the analytical thinking required to apply accounting theory and forensic skills to determining the actual financial state of a company on the one hand and to analysing empirical and theoretical problems in a scholarly manner on the other

LEARNING ACTIVITY SUMMARY

Lecture Week 1

Topic Framework for Financial Statement Analysis

Prescribed Readings Robinson et al (2009) and (2012) Ch 1, 2 &3 Worldwide Accounting Diversity and International Standards. Hoyle: Ch 11 LMS Financial Statements Forecasting. Sengupta: Ch 6 LMS: Palepu, K et al. Chapter 4 Robinson et al (2009) and (2012) Ch 4, 5 Robinson et al (2009) and (2012) Ch 6 The Statement of Cash Flows. CFA Institute: Reading 35 LMS Is it Operating or Investing Cash Flow? CFA Institute Reading 28 LMS Mulford & Comiskey: Ch 4 Electronic resource in Library Mulford & Comiskey: Ch 6 & 7 Electronic resource in Library Robinson et al (2009) and (2012) Ch 7 and 8 Dilutive Securities and Earnings per Share. Kieso: Ch 16 LMS Robinson et al (2009) Ch 9 or (2012) Ch 8

Learning outcomes (SILO) addressed SILO 1

Week 2

Modelling for Financial Analysis Income Income Statement and Balance Sheet Cash Flow Statement

SILO 2 and 5

Week 3 Week 4

SILO 3 SILO 4

Week 5 Week 6

Cash Flow Statement Financial Analysis Techniques and Applications MID SEMESTER TEST Financial Statement Analysis Applications Analysis of Inventories

SILO 4 SILO 2

Week 7

SILO 2

Week 8

Robinson et al (2009) Ch 10 or (2012) Ch 9 Robinson et al (2009) Ch 11 or (2012) Ch 10 Robinson et al (2009) Ch 12 or (2012) Ch 11 Robinson et al (2009) Ch 13or (2012) Ch 12 Robinson et al (2009) Ch 15 or (2012) Ch 14 White et al (2003): Ch 13 Robinson et al (2009) Ch 17or (2012) Ch 16 and 17

SILO 2

Week 9

Analysis of Long-lived Assets Analysis of Taxation

SILO 2

Week 10

SILO 2

Week 11

Analysis of Long-term Liabilities and Leases Analysis of Intercorporate Investments Evaluating Financial Reporting Quality, Integrating Financial Statement Analysis and Revision

SILO 2 and 4

Week 12

SILO 2

Week13

SILO All

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No. Week 1 Week 2

Assignments/ Mid Semester test

Topic No tutorials Framework for Financial Statement Analysis

Prescribed Readings

Week 3

Modelling for Financial Analysis

Week 4

Income Statement and Balance Sheet Cash Flow Statement

Week 5

Week 6

Cash Flow Statement

Week 7

Mid term test th 24 April 3pm

Financial Analysis Techniques

Week 8

Financial Statement Analysis Applications

Week 9

Analysis of Inventories

Week 10

Analysis of Long-lived Assets

Week 11

Assignment 3:00pm, Friday

Analysis of Taxation

Week 12

Analysis of Long-term Liabilities and Leases

Week 13

Analysis of Inter-corporate Investments

Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) and (2012)Ch. 1, Practice Problems 1-5: Ch 2, Practice Problems 1-20; Ch 3, Practice Problems 1-20 How to do Vitex example Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) and (2012)Ch. 4, Practice Problems 1-20: Ch 5 1-24(23): Robinson et al (2009) and (2012)Ch. 3, Practice Problems 1-18: White et al (2003): Ch 2, pages 68-73. Problems 2, 6, 9 and 11 (additional 8 and 13) Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) and (2012)Ch. 6, Practice Problems 1-23: White et al (2003): Ch 3, pages 99-109. Problems 3 and 6. Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) and (2012)Ch. 6, Practice Problems 1-23: White et al (2003): Ch 3, pages 99-109. Problems 1 and 14; Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) and (2012)Ch. 7, Practice Problems 1-22: White et al (2003): Ch 4, pages 154-162. Problems 2,3, 4, 5 and 6 Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) Ch. 9 or (2012) Ch 8, Practice Problems 1-14: White et al (2003): Ch 4, pages 154-162. Problems 19 and 27. Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) Ch. 10 or (2012) Ch 9, Practice Problems 121(45) White et al (2003): Ch 6, pages 220-226. Problem 10 and 12 ; White et al (2003): Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) Ch. 11 or (2012) Ch 10, Practice Problems 123(35): White et al (2003): Ch 7, pages 252-256. Problems 1 and 11. Ch 8, pages 283-289. Problems 6 and 10. Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) Ch. 12 or (2012) Ch 11, Practice Problems 122: White et al (2003): Ch 9, pages 317-321. Problems 1, 2, 14 and 16. Application of lecture theory to the Company to be analysed in Assignment Robinson et al (2009) Ch. 13 or (2012) Ch 12, Practice Problems 121(16): White et al (2003): Ch 10, pages 355-362. Problems 3, 5 and 17 Application of lecture theory to the Company to be analysed in Assignment Review of assignment Robinson et al (2009) Ch. 15 or (2012) Ch 14, Practice Problems 125(35): Plus (2009) Ch 17 or (2012) Ch 16, Practice Problems 1-20(25) PLUS 2012 Ch 17 Practice Problems 1-21 White et al (2003): Ch 13, pages 493-502. Problems 1 and 2 (and for question 2, this includes exhibit 13-3 on page 463).

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Further information is available at http://www.latrobe.edu.au/timetable/ ASSESSMENT AND FEEDBACK SUMMARY Assessment Tasks: Mid semester Test Assignment Review of Draft Assignment Submission Due Date 24 April 9 -21 May 24th May
th st th

% 10%> 0% 30%

Comments No other sittings optional Must be submitted in hard copy as well as on Turn it in

Exam

TBA

60%

.1

Mid-semester test
Due Date: Wednesday 24th April 3pm Mark Allocation: 10% Composition: Multiple Choice

One Mid Semester Multiple Test Quiz: comprise 10% of total assessment

Submitting your assignment

A coversheet needs to be completed and stapled to the front of each assignment that you submit. These can be found on the Faculty of Business, Economics & Law Student Portal. http://www.latrobe.edu.au/students/fbel/index.html Forms: http://www.latrobe.edu.au/students/fbel/faculty%20resources/forms.html
Student Services staff do not accept assignments on behalf of lecturers.

Please note that the procedure to submit your assignment does vary from campus to campus please see details below: Assignments comprise 30% of total assessment. Students will be required to complete a major assignment, which will contribute towards the final assessment. No supplementary assignments will be offered. The assignment must be submitted in hard copy format in the assignment box. It is also to be submitted in soft copy format so that the lecturer can assess it using the software package, Turn-it-in.
Assignment: This will comprise a 4,000 word paper and contribute 30% to the final mark. Students will be asked to prepare a report setting out a financial analysis of a publicly listed company. The focus of this assessment task is to test the students achievement of learning objectives 3 and 4 and generic skills 1, 2 and 4. The due date for each assignment is listed on the third page of this Subject Learning Guide

Assignment format

Individual Assignment Official due date: 3:00pm, Friday, Week 11, 2013. Hard copy: Assignment box located on the second level Donald Whitehead Building. Soft copy: Consult the document GUIDELINES FOR ELECTRONIC AND HARD-COPY SUBMISSION OF ASSIGNMENTS for the correct procedure to follow. This document is located on the subjects LMS website. Draft: In weeks 9 and 10 students are invited to make an appointment with the lecturer to have a draft of their assignment reviewed. You may NOT send your draft via email. Appointment times will be advertised closer to the submission date. You may come in groups. Marks: The assignment will be marked out of 100 and will comprise 30% of the final grade.
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Allocation of marks will be divided among the following areas: Analysis and interpretation of results 65% (Including original contribution) Range and accuracy of calculations 25% Presentation 10% An assessment sheet listing specific points under each of these three categories will be used for the assessment of your assignment. Consult the GUIDELINES FOR ELECTRONIC AND HARD-COPY SUBMISSION OF ASSIGNMENTS located on the subjects LMS website. This should be used as guidance in preparation of your assignment. Word limit: Format: 4,000 words Typed 12-point Times Roman font A4-sized pages, stapled top-left corner, no cover Attachment: Signed Statement of Authorship (individual) Students are advised to work in a group when preparing the calculations for their assignment. However, you are reminded that it is an individual assignment and the analysis for the assignment should be done separately. Each group member should produce and submit an assignment that contains only their written work. Materials: AUSENCO other relevant data. Task: You are an assistant analyst for an investment bank. Prepare a report which sets out a complete financial analysis to an adjusted set of accounts of AUSENCO. It is not sufficient to simply present typed or spreadsheet solutions. You are required to demonstrate and explain your assumptions and the workings to obtain your solutions.

Examination A Final Examination comprises 60% of total assessment. The examination will be of three hours duration with an additional 15 minutes reading time. A minimum of 50% (i.e. 30/60) will be required to be obtained for the final exam alone, in addition to a minimum of 50% of the entire assessment load, in order to obtain a pass for the Subject. The examination will be divided into three sections: Section A: Multiple Choice questions. Some will require calculated answers as well as some theoretical questions. Section B: One question worth 25 marks. The focus of this section is to test the material undertaken in the assignment. This assessment task is to test the students achievement of learning in all of the assessment tasks. Section C: Students must complete two out of four questions. Each question may require a theoretical, analytical, textual and/or graphical answer; each question in this section is worth 25 marks, divided equally among any sub-questions, unless stated otherwise. The focus of this section of this assessment task is to test the students achievement of learning objectives 2 and 4.

Assessment requirements
Passing the subject In order to pass this subject, students must: achieve at least 50% in the final examination as well as a total of 50% in the sum of the marks for all assessment tasks to pass the Subject Failure to meet these required standards will result in a fail in this subject. The final grades in the subject and in each of the assessment tasks will be allocated according to the following scale:
A 80 100% B 70 79% C 60 69% D 50 59% N 49% or less
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LEARNING RESOURCES

Reading Type Essential

Title

Author and Year

Publisher Wiley

International Financial Statement Analysis International Financial Statement Analysis Workbook CFA Level I Candidate Readings CFA Level II Candidate Readings, Advanced Accounting (8th edition Intermediate Accounting (12th edition), Hoboken, NJ.:. Creative Cash Flow Reporting: Uncovering Sustainable Performance Business Analysis and Valuation.

Robinson, T.R., H. van Gruening, E. Henry, M.A. Broihahn, 2012 Robinson, T.R., H. van Gruening, E. Henry, M.A. Broihahn, 2012 CFA Institute (2007a), CFA Institute (2007b), Hoyle, J.B., T. Schaefer and T. Doupnik (2007), Kieso, D.E., J.J. Weygandt and T.D. Warfield (2006 Mulford, C.W. and E.E. Comiskey (2005), , Hoboken, NJ.:. Palepu, Krishna. Healy, pAul. Bernard, Victor. Wright, Sue. Bradbury, Michael. Lee Philip. (2010) Sengupta, C. (2004), , Hoboken, NJ White, G.I., A.C. Sondhi and D. Fried (2003), (3rd edition), Hoboken, N.J.: ISBN: 0471375942. 657.3 W584an 2003 White, G.I., A.C. Sondhi and D. Fried (2004), (3rd edition), Hoboken, NJ.: ISBN: 0471375934. 657.3 W584an 2003a

Essential

Wiley

Additional Additional Essential Additional

CFA Institute. CFA Institute. McGraw-Hill John Wiley

Essential

John Wiley

Additional

CengageLearning

Essential Essential

Financial Modeling Using Excel and VBA The Analysis and Use of Financial Statements

John Wiley John Wiley.

Essential

Solutions Manual to Accompany The Analysis and Use of Financial Statements

John Wiley.

Submission of Work after Due Date

Unless an extension is specifically granted via the Application for Extension/Re-weighting of Assessment form (available from http://www.latrobe.edu.au/students/fbel/assets/downloads/2010%20Downloads/2010flm-application-for-extension.pdf , late work will be penalised as follows:
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A piece of assessment submitted after the due date without prior approval will be subject to a penalty. The penalty will be 10% of the assessment mark per day up to a maximum of 3 days (whether week days, part days, weekends or public holidays or combinations thereof) after the due date. Work submitted after 3 days will be returned un-assessed. Students seeking extended time for submitting work must apply to the subject coordinator no less than 48 hours prior to the submission date. An application for extended time should be made using the Application for Extension or ReWeighting of Assessment form available from the Student Services Officer at your campus :

or at http://www.latrobe.edu.au/students/fbel/assets/downloads/2010%20Downloads/2010-flm-applicationfor-extension.pdf . The form must include all circumstances pertaining to the requirement for additional time and supporting documentation (e.g. medical certificates) should be attached. Upon completion the form should be submitted directly to the subject coordinator. The subject coordinator will review the application within 24 hours of submission and inform the student of the outcome by completing the second part of the form. Where extended time is granted, a copy of the form should be attached to the assignment upon submission. All appeals against a decision regarding an extension of time should be made in writing to the Head of School, within 24 hours of that decision.

Missing the Mid-Semester Test

In rare and extenuating circumstances a student may not be able to sit the mid-semester test because of illness or misadventure. In such circumstances the student should apply to have their grades re-weighted using the Application for Extension or Re-Weighting of Assessment form available from Student Service Office at your campus. The form must include all circumstances appertaining to the test and supporting documentation (eg medical certificates) should be attached. Students should submit the form immediately upon the resumption of study. The subject coordinator will review the application within 24 hours of submission and inform the student of the outcome by completing the second part of the form. Where a reweighting of marks is granted, the value of the final examination will be increased to account for the marks originally assigned to the mid-semester test.

Final Examination
The examination is a closed book examination. No materials, other than the examination paper and the answer booklets may be open during the exam. Students will be allowed to take into the examination a non-programmable calculator. Students who do not sit for final examination at the scheduled time will be awarded a mark of zero. In rare and extenuating circumstances a student may not be able to sit a final exam because of illness or misadventure. If you miss the final examination, you must lodge an application for special consideration within 72 hours of the test or examination time. You should also explain your circumstances to the subject coordinator. A special consideration form can be found via link provided http://www.latrobe.edu.au/lawman/currentstudents/assets/downloads/2010-flm-application-specialconsideration-form.pdf and it is usual to include a doctors certificate or supporting evidence with this form.

FBEL Policy on Review and Re-Marking of Academic Work

Information regarding the process can be found at the link below:
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http://www.latrobe.edu.au/lawman/currentstudents/faculty/administration/re-marking-policy.html

Special circumstance processes

Special Consideration
Special Consideration is an equity measure to ensure that the assessment of students takes account of temporary adverse circumstances that impact negatively on individual students ability to demonstrate their learning achievements in an assessed task. Students who consider that their performance in an assessed task was adversely affected by compelling or compassionate circumstances may apply to the University for Special Consideration. It is not a substitute for knowledge or skills you should have learned and because of this you will not be granted special consideration for your performance throughout a semester. IMPORTANT NOTE An application for special consideration does not guarantee that you will be granted a special examination or an adjustment to your results. The Committee reviews each application on an individual basis. In most cases, you will NOT be given a second opportunity to sit an examination as a result of an application for special consideration. The Committee only approves second examinations in extraordinary cases. If you do not submit your application on the Faculty of Law and Managements Application for Special Consideration form then your application will not be considered. If your application does not contain all of the information requested and the required supporting documentation then your application will not be considered. If your application is not submitted within the required time frame after the due date of the assessed task then your application will not be considered.

Applications for special consideration will be considered by a Faculty Committee comprised of academic staff members. Once the Committee has assessed your application, your subject co-ordinator will be notified of the results of the application. The decisions of the Special Consideration Committee are final and cannot be changed by Subject Co-ordinators. Please do not contact Subject Co-ordinators regarding the outcome of special consideration applications. If you have queries about the Committees decisions, you should submit those queries in writing to the Committees email address: FBEL@latrobe.edu.au. All inquiries should be submitted not later than 14 days after the release of final results. Who should apply for special consideration? A student who is unable to sit an examination due to illness or other cause.

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A student who considers that his or her performance in an assessed task has been adversely affected by illness or other cause immediately prior to the due date of the assessed task. Requests for special consideration must be for serious circumstances beyond the control of the student and will usually fall within the following causes: Serious illness or psychological condition e.g. hospital admission, serious injury, severe illness, severe anxiety, or depression (not on-going conditions) Loss or bereavement e.g. death of a close family member Hardship/trauma e.g. victim of crime, sudden loss of income or employment, family relationship breakdown, severe disruption to domestic arrangements.

When should you apply for special consideration? Applications should be submitted to the local Student Administration Office of the University not later than seventy-two hours after the due date of the assessed task. What outcomes are possible? Applications will be assessed and will be assigned one of the following outcomes: How should you make application for special consideration?
You must obtain a copy of the official Faculty of Business, Economics & Law Application for Special Consideration form from the following website: http://www.latrobe.edu.au/students/exams/documents/Application-for-Special-Consideration-FLM.pdf

reschedule an Assessment Task; or set a substitute Assessment Task; or allow extra time to complete an Assessment Task; or award a reasonable adjustment of mark for the Assessment Task or subject for which special consideration is sought; or recommend that the Chief Examiners offer a formal Special Examination; or decide that there are insufficient grounds for the award of special consideration.

All of the information requested on the form must be filled out. You must supply evidence of the reason you are applying for special consideration. For example, if it is medically related you must have a registered medical practitioner fill out the section in the Application Form and sign it. Medical certificates must be completed by a registered medical practitioner. The best way to ensure that this is the case is to ensure the certificate includes a Medicare Provider Number. (This is normally a 5 or 6-digit number followed by 2 letters). Certificates that do not include a Provider Number will not be accepted. The medical certificate must state that in the medical practitioners opinion you were or will be unfit to attend an assessment task or have been or will be adversely affected by illness. Medical certificates in which the medical practitioner reports that you claim to be unwell will not be accepted. The medical certificate must cover the date on which the assessment is held.
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If you are unable to complete an assessment component or your study is adversely affected due to a nonmedical reason, you are encouraged to provide as much documentary evidence as you can to support your application. This should be objective evidence from an independent source. Documentation may include a death notice or certificate, a police report, a letter from an employer, a current letter from La Trobe Counselling Services or La Trobe Equality and Diversity Centre. If you have questions or concerns about documentation, see Student Administration on your campus for advice. Students can contact the Committee: FBEL@latrobe.edu.au with queries about documentation. You must lodge the special consideration form and the supporting documentation to Student Administration at your campus.

How will you know the outcome of your application? The Committees decisions are emailed to your University email address. Please check your e mail for outcomes. The following circumstances are not normally matters covered by special consideration: If you need support because of a disability, mental health issue, or ongoing medical condition, this is not normally a matter for special consideration. For this type of long-term assistance, contact the Equality and Diversity Centre on your campus as soon as you become aware of the need for assistance and as early in the semester as possible. If you have timetable clashes, exams scheduled close together, or more than the usual number of exams because you have been allowed to overload your enrolment, you will not be eligible for special consideration. Special consideration will not be granted to accommodate travel plans, attendance at social events such as weddings, visits with relatives/friends or any discretionary activities. Special consideration will not be granted because of avoidable issues related to visa requirements. Special consideration will not be granted for extensions. You should use the Application for Extension/Reweight of Assessment form available from Student Services Office. http://www.latrobe.edu.au/lawman/currentstudents/faculty/administration/special-consideration.html

Academic Language and Learning (ALL) Unit

The Academic Language and Learning (ALL) unit works closely with teaching staff in all Faculties and campuses to ensure that all La Trobe students including those from non-English-speaking backgrounds develop high-level academic speaking, writing, reading, and numeracy skills required for successful learning in their courses. To achieve those ends, the ALL Unit staff: collaborate on course and subject design; advise on teaching and learning strategies; teach/co-teach special undergraduate and postgraduate subjects, tutorials and workshops; and provide professional development for staff.

If you would like help with writing and research skills and your assignments please contact the Faculty Academic Language and Learning team at the following email address allu.fbel@latrobe.edu.au.

STUDENT FEEDBACK ON SUBJECT SURVEY

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The Student Feedback on Subjects (SFS) Survey is part of the quality assurance process that occurs across the university. In this survey you are invited to tell us about your learning experiences in this subject. Your views will be taken seriously and will assist us to enhance this subject for the next group of students. The surveys are anonymous and will be distributed prior to the end of the teaching period.

ACADEMIC INTEGRITY Academic integrity means being honest in academic work and taking responsibility for learning the conventions of scholarship. La Trobe University views this seriously as evidenced by the following extract: Academic honesty is a fundamental principle in teaching, learning, research and scholarship. The University requires its academic staff and students to observe the highest ethical standards in all aspects of academic work and it demonstrates its commitment to these values by awarding due credit for honestly conducted scholarly work, and by penalising academic misconduct and all forms of cheating. Academic Integrity Procedures (2010, p. 1 of 6) Academic misconduct includes poor referencing, plagiarism, copying and cheating. You should familiarise yourself with your responsibilities in relation to Academic Integrity and if you have any questions, direct them to your Course Coordinator. Information can be found on the website at: http://www.latrobe.edu.au/learning/integrity.html.

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