Introduction

This unit emphasizes how parties external to the company employ publicly available information, company reports and financial market information to evaluate the current, and predict the future financial condition of the company. The analytical techniques of financial statement analysis (e.g. fundamental analysis, cash flow analysis and pro forma analysis) and the issue of the reliability and quality of publicly available information are discussed and explored. Analytical tools are applied in different decision contexts such as equity valuation, earning forecast, credit risk analysis, mergers and acquisition.

Teaching and Learning Strategy

The delivery of this unit involves lectures, discussions on the case studies drawn from leading business case studies providers, financial media coverage, and tutorials. After taking this unit, students should be able to achieve the following outcomes: (1) demonstrate knowledge of how fundamental or intrinsic firm values are estimated; (2) demonstrate an awareness of business strategies and activities that create value; (3) discuss the relevance of cash flows, dividends, earnings and book values in firm valuation and integrate profitability into a firm's value; (4) explore and evaluate the determinants of a firm's market-to-book ratio (P/B) and also its price-earnings ratio (P/E); (5) Perform equity security analysis, credit analysis and distress prediction.