QUEENSLAND UNIVERSITY OF TECHNOLOGY

QUT BUSINESS SCHOOL

SCHOOL OF ACCOUNTANCY

AYN505 FINANCIAL ANALYSIS & BUSINESS VALUATION

UNIT OUTLINE
Semester 1, 2011

Credit Points 12
Discipline Code 0801010
Major Course BS16/17, BS93
Codes
Basic accounting and business finance i.e.,
Prerequisites
AYN417, AYN418 & EFN406 or equivalent p’grad or u’grad subjects
Corequisite(s) Nil
Anti-requisites Nil
(incompatible
s)
Name Prof. Gerry Gallery
Unit Coordinator
Phone 3138 8347
Fax 3138 1812
Room B 339
Email g.gallery@qut.edu.au

School of Accountancy Office,

School Contact
Level 3 B Block
(if unable to contact Phone 3138 5292
teaching team) Fax 3138 1812
Contact hours Seminar: 3 hours per week

RATIONALE
This unit (previously called Dissecting Financial Statements) is about the analysis of financial
information arising primarily from the financial reports of entities. The fundamental analysis
techniques that are covered in this unit are widely used in the financial sector. The unit is in
essence a capstone subject that brings together areas of financial accounting, finance and
strategic management. Because of the interdisciplinary nature of the unit, it is a very useful
preparatory unit for the CPA, CA and CFA programs. Also, due to the applied nature and
international focus of the unit, it is of interest to those contemplating careers in investment
banking (particularly in equity research), security analysis, funds management, financial
planning, business consulting, corporate finance and public accounting in both Australia and
overseas countries. The unit also has wide application in personal financial analysis and
investment activities.

AIM
The aim of this unit is to develop students’ knowledge, understanding and ability to apply
financial statement analysis in business decision making activities. Fundamental analysis
techniques are examined in detail with particular emphasis on the application of these
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techniques in equity (share) valuation decisions.

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LEARNING OUTCOMES
Course Learning Goals (Postgraduate)
The Faculty of Business has established the Assurance of Learning (AoL). Goals to meet
contemporary industry needs and standards. Achieving these learning outcomes will assist you
to meet the desired graduate outcomes set at QUT - aligned with other internationally
renowned business schools.

Have knowledge and skills pertinent to a particular discipline (KS)

1.1 Well-researched knowledge and critical understanding applied to issues at the forefront of a
specialised discipline area.
1.2 Ability to select and use effectively a range of tools and technologies to locate and/or generate
information appropriate to the disciplinary context.

Be critical thinkers and effective problem solvers (CTA)

2.1 Apply logical, critical and creative thinking and judgement to generate appropriate solutions to
problems in the disciplinary context.

Be professional communicators in an intercultural context (PC)

3.1 Ability to create and present professional documents and/or reports using high levels of
analysis/synthesis/evaluation for a range of contexts and audiences
3.2 Ability to orally communicate and justify ideas and information, at a professional level, for a variety
of contexts and audiences, including peers and discipline specialists.

Be able to work effectively in a Team Environment (TW)

4.1 Operate effectively and with flexibility to achieve common goals in collaborative settings, using a
range of skills, including leadership, negotiation, reflection, proactivity and support for team members

Have a Social and Ethical Understanding (SEU)

5.1 Apply knowledge of the ethical, social and cultural dimensions relevant to business situations,
including appropriate standards or codes of practice, to provide courses of action.

The specific course learning goals that apply to this unit are shown in the assessment section
of this unit outline.

Learning Objectives
The objectives in this unit are based on the Graduate Capabilities identified as being relevant
and complete information about Graduate Capabilities is included in the Week 1 Unit
Information Document provided to students in Week 1 of each Semester. Please note that
Discipline Knowledge, one of the Graduate Capabilities, has been listed separately so that
more detail can be provided regarding the specific knowledge you will gain through the
completion of this unit.

Discipline Knowledge Other Graduate Capabilities (generic

On completion of the unit you should be able to:
1. Demonstrate the application of financial
statement analysis (FSA) techniques;
2. Explain the linkage between strategic
business analysis, accounting analysis and
financial analysis;
3. Identify and utilise value-relevant information
contained within financial statements;
4. Recognise and explain the fundamental role of
accounting numbers in the valuation of
entities;
5. Prepare and substantiate a valuation that
incorporates the strategic, accounting and
financing activities of a business entity.
skills)
On completion of the unit, you should be able to:
A. Apply analytical thinking skills to determine
how to effectively use detailed financial
information in various contexts;
B. Take responsibility for your learning process;
C. Participate as a cooperative, responsive and
productive team member;
D. Conduct applied business research (including
locating and critically interpreting and
evaluating firm-specific financial information);
E. Employ effective oral, written and
interpersonal communication skills appropriate
to the context.

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Consistent with the learning objectives of the unit, emphasis is placed on translating the tools of
business analysis and valuation into context-specific settings. To achieve this aim, the unit is
relatively case and project intensive. This hands on approach is ideal in illustrating applications
of fundamental analysis principles and is effective in facilitating the development of key
analytically skills.

CONTENT
The unit comprises three related parts. Part one outlines the four basic steps in the fundamental
analysis framework: business analysis, accounting analysis, financial analysis and prospective
analysis. The next part combines these skills in addressing the question of valuation, while the
final section of the unit applies the skills in several different contexts, such as credit analysis,
security analysis, mergers and acquisitions and financial policy decisions. The financial analysis
techniques are applied in case studies involving both domestic and international companies.

TEACHING AND LEARNING APPROACHES

Seminar Procedure
There will be one three-hour seminar each week, comprising a one- to two-hour lecture
component and a workshop that either precedes or follows the lecture. The workshop may be
used to discuss a case, review assigned problems or practice skills. Case studies analysis
involves individual, group and class problem-solving methodology. Seminar questions will be
provided in class and posted on the Unit website in the week prior to the related seminar.
Prior to the seminar, students are required to read the relevant unit materials and prepare
written responses to assigned questions. The assignments often require additional research
beyond the normal prescribed readings. You should bring your prescribed textbook and a
calculator to each class.

Self Study
Self study is a key element of the learning design of this unit. In most sessions readings and
self study materials will be provided in class and/or posted on Unit website to facilitate deeper
learning of core elements of the unit. The aim of these self-study materials is to encourage you
to assume responsibility in the learning process, and to broaden your understanding of the
material covered in class. Please note that there are no readings sets required to be purchased
at the start of the unit. All additional reading material will be distributed in class. This ensures
that readings are current and topically.

Preparation For and Performance in Seminars

In preparation for each seminar, you will be expected to undertake the prescribed readings,
attempt cases/problem sets prior to attending classes, and come to class suitably prepared.
With this objective in mind, marks will be awarded for your attempt at completing the
assignments and your class contribution (see below for details).

Workload
It is expected that you will spend at least 12 hours per week studying this unit. This time
should be made up of reading, research, working on exercises and problems, performing
computer tasks and attending classes. In periods where you need to complete assignments or
prepare for examinations the workload may be greater. The cumulative nature of the material
covered in the unit necessitates regular commitment each week to completing the assigned
work.

Please note that under-estimation of the on-going workload requirements has been a cause of
failure for students in the past. You should take the required workload into account when

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planning how to balance study with employment and other activities.

Attendance
Regular and punctual class attendance (for the full time period) is expected in this unit.
Attendance will be recorded at the commencement of each class. If you are not present at the
roll call your attendance will not be recorded. Note that when in class you are expected to
conduct yourself with consideration and respect for the needs of your fellow students and
teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or
talking on mobile phones, is not acceptable and students may be asked to leave the class.

Keeping Informed
You should keep abreast of all announcements made in seminars or on the unit website.
Following each session lecture notes, summary solution points, spreadsheets and where
practical, the additional reading material will be placed on the unit website. If you miss a
seminar, you should consult the website information prior to seeking information from the unit
instructor. Also, important announcements may be directly forwarded to your university e-mail
address without a follow up paper copy. In all cases, you will be deemed to have received this
information.

Students who comply with the above teaching and learning approaches are normally
successful in meeting the assessment activities of the Unit. These activities (outlined below)
have been carefully designed to progressively develop your knowledge, understanding and
skills using a range of inter-related assessment methods appropriate to the Unit.

ASSESSMENT
The assessment in this unit aims to support your achievement of the learning objectives for
both Discipline Knowledge and Other Graduate Capabilities. Assessment has been designed
in order to allow you to both:

• receive regular feedback on your learning as you progress toward the development of
knowledge, understanding, skills and attitudes (formative assessment); and
• demonstrate your learning in order to achieve a final grade (summative assessment).

Students will receive feedback in various forms throughout the semester which may include:
• Informal: worked examples, such as verbal feedback in class, personal consultation
• Formal: in writing, such as checklists (e.g. criteria sheets), written commentary
• Direct: to individual students, either in written form or in consultation
• Indirect: to the whole class

Assessment item 1:
Assessment Type: Seminar Preparation and Participation
Description:
(a) Seminar Assignment Preparation
The seminar assignments are aimed at progressively building your knowledge and
understanding of FSA issues as they are examined throughout the session. Seminar
assignments include both assigned cases and project tasks (as outlined in the Week 1
Document). You should attempt the case questions shown for the case and any other
assigned questions distributed in the class.
(b) Seminar Participation
The amount of learning that takes place in this unit critically depends on class interaction. To
encourage effective interaction, a mark will be awarded (at the conclusion of the last class) for
your participation in seminars.
Relates to learning objectives: 1,2,3,4,5, A,B,C,D & AoL CTA 2.1, KS1.1,1.2, PC 3.1,3.2.

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Weight: 20%
Group or Individual: Individual
Due date (approximate): Weekly

Assessment Item 2
Assessment Type: Analysis Project
Brief Description: The analysis project is aimed at developing your understanding of, and
practical skills in financial statement analysis and valuation. It is also designed to enhance
teamwork, and analytical and communication skills. Upon successful completion of the project
you will have acquired a working knowledge and practical skills in undertaking an equity
valuation using ‘leading-edge’ financial statement analysis techniques. From past experience,
the final report often provides excellent evidence to current and prospective employers of your
analytical skills.
Relates to learning objectives: 1,2,3,4,5 & A,C,D,E, AoLs: KS1.1, 1.2, CTA 2.1, PC3.1, 3.2,
TW4.1.
Weight: 30%
Group or Individual: Individual & Group
Due date (approximate): Week 11 or 12

Assessment Item 3
Assessment Type: Examination
Description:Depending on class numbers the final examination will be either in the form of a
take-home assignment or in-class exam. All material covered in the unit is examinable and the
exam content will be similar in spirit to the problems and cases assigned during the semester.
Full details will be provided during the semester.The final examination will be a take-home
assignment or in-class exam. You must pass the final examination to pass the unit; otherwise
a fail grade for the Unit will be awarded even if your total recorded mark prior to the exam
exceeds 50%.
Relates to learning objectives: 1,2,3,4,5, A,B,D & AoLs: KS 1.1, 1.2, CTA 2.1.
Weight: 50%
Group or Individual: Individual
Due date: Week 13 or Examination period

ACADEMIC HONESTY
Academic honesty means that you are expected to exhibit honesty and act responsibly
when undertaking assessment. Any action or practice on your part which would defeat the
purposes of assessment is regarded as academic dishonesty. The penalties for academic
dishonesty are provided in the Student Rules. For more information you should consult the
Academic Integrity Kit, and the QUT Library resources for avoiding plagiarism.
This unit may use the SafeAssign tool in BlackBoard. SafeAssign is a text matching tool that assists
students to develop the academic skills required to correctly use and cite reference material as well
as to check citations and determine possible instances of plagiarism. You may be asked to use
SafeAssign, in which case you will be expected to submit draft and/or final versions of one or more
assignments and may be asked to answer a short online survey about the tool. Using SafeAssign
does not constitute formal submission of an assignment. Your Unit Coordinator will provide detailed
information on how the software will be used for individual assignments. The use of the tool is for
educative purposes and is entirely voluntary.

RESOURCE MATERIALS
Prescribed Textbook/Readings
• Palepu, K., P. Healy, V. Bernard, S. Wright, M. Bradbury, P. Lee, 2010, Business Analysis
& Valuation Using Financial Statements – Text & Cases, 1st (Aus.) ed., Cengage Learning,
Australia.
• Additional readings will be handed out in seminars throughout the unit.

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Other Useful References

Other Textbooks:
 Foster, G., 1986, Financial Statement Analysis, Prentice Hall, Englewood Cliffs, New Jersey.
 Lonergan, W., 1994, The Valuation of Businesses, Shares and other Equity, 2nd ed.,
Longman.
 Lundholm, R., and R. Sloan, 2004, Equity Valuation & Analysis with Eval, McGraw Hill.
Penman, S.H., 2007, Financial Statement Analysis and Security Valuation, 3rd Edition,
McGraw Hill.
 Revsine, L., D Collins and W Johnson, 2005, Financial Reporting and Analysis, 3rd Edition,
Pearson Education.
 Stickney, C.P., P.R. Brown and J. M. Wahlen, 2004, Financial Reporting and Security
Analysis: A Strategic Perspective, 5th ed., Thomson, South-Western.
 White G.I., A.C. Sondhi and D. Fried, 2003, The Analysis and Use of Financial Statements,
3rd ed, John Wiley & Sons, Inc.
 Wild, J.J., L.A., K.R. Subramanyan, and R.F. Halsey, 2007, Financial Statement Analysis, 9th
ed., McGraw Hill.
(Note, later editions of these textbooks may be available.)

Accounting Standards:
 CPA Australia and The Institute of Chartered Accountants in Australia, Accounting and
Auditing Handbook (latest edition).
The AIFRS (Australian International Financial Reporting Standards) can also be
downloaded from the AASB web-site (www.aasb.com.au) together with information on the
convergence of AASB /IFRS standards.

Other Resources
Students would normally be expected to purchase the prescribed text books and print lecture
and tutorial materials and appropriate documents from the Unit website and/or CMD.

Risk Assessment Statement

There are no out-of-the-ordinary risks associated with lectures or tutorials in this unit. You
should, however, familiarise yourself with evacuation procedures operating in the buildings in
which you attend classes.

Disclaimer - Offer of some units is subject to viability, and information in this document is
subject to change prior to commencement of semester.

Prof Gerry Gallery

Unit Coordinator

28 February 2011

AYN505 Financial Analysis & Business Valuation Unit Outline: 5/21/2011