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ACCT3610 Business Analysis and Valuation
Course Details & Outcomes
Course Description
This course focuses on the analysis of financial information arising primarily from the financial reports of firms. Fundamental analysis techniques are examined in detail with particular emphasis on the application of these techniques in equity (share) valuation decisions. Attention is also given to credit assessment and debt valuation decisions. The techniques are applied in cases and projects involving listed companies.
Topics considered include fundamental ratio analysis using reported financial information, and an analysis of accrual accounting and cash flows. You will undertake a structured analysis of profitability, growth and value generation in a firm, and develop forecasts of earnings and cash flows and use those forecasts in the context of both equity valuation and credit analysis. There is a specific focus on data analytics throughout the course.
Course Aims
Business Analysis and Valuation is a capstone course that brings together areas of financial accounting, finance and strategic management. Because of the interdisciplinary nature of the course, this course aims to synthesize and apply what you learnt in previous courses, to further develop the graduate attributes, and to prepare you for the professional career. This course is a very useful preparatory course for the CPA, CA and CFA programs. Due to the applied nature of the course, it is helpful to those contemplating careers in investment banking (particularly in equity research), security analysis, funds management, financial planning, business consulting, corporate finance and public accounting. The course also has wide application in personal investment activities.
Relationship to Other Courses
Business Analysis and Valuation is a capstone course that brings together areas of financial accounting, finance and strategic management. This course is offered by the School of Accounting and is generally taken as an elective or Disciplinary Specialisation course in the Master of Commerce or Master of Professional Accounting degrees.
Because of the interdisciplinary nature of the course, this course aims to synthesize and apply what you learnt in previous courses, to further develop the graduate attributes, and to prepare you for the professional career. This course is a very useful preparatory course for the CPA, CA and CFA programs. Due to the applied nature of the course, it is helpful to those contemplating careers in investment banking (particularly in equity research), security analysis, funds management, financial planning, business consulting, corporate finance and public accounting. The course also has wide application in personal investment activities.
Course Learning Outcomes
| Course Learning Outcomes | Program learning outcomes |
|---|---|
| CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements. |
|
| CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity. |
|
| CLO3 : Construct written work which is logically and professionally presented. |
|
| CLO4 : Communicate ideas in a succinct and clear manner. |
|
| CLO5 : Work collaboratively to complete tasks. |
|
| CLO6 : Identify and assess environmental and sustainability considerations in valuation and portfolio construction. |
|
| Course Learning Outcomes | Assessment Item |
|---|---|
| CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements. |
|
| CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity. |
|
| CLO3 : Construct written work which is logically and professionally presented. |
|
| CLO4 : Communicate ideas in a succinct and clear manner. |
|
| CLO5 : Work collaboratively to complete tasks. |
|
| CLO6 : Identify and assess environmental and sustainability considerations in valuation and portfolio construction. |
|
Learning and Teaching Technologies
Moodle - Learning Management System | Zoom
Learning and Teaching in this course
This course helps you to apply the accounting knowledge and skills you acquired in previous courses to analyse and determine the value of a company in the real business world. We will explain basic techniques and principles of financial statement analysis in either a Face to Face lecture or in the online seminars. We will use case studies extensively to illustrate how to analyse and value a business. To gain most from this course, you are encouraged to think critically and participate actively in the class discussion. You also need to develop an appreciation of the link between qualitative and quantitative analysis. To achieve this, preparations before classes are essential. You also have a chance to analyse and value a real company, which requires you to take initiatives and work effectively in a group environment.
Assessments
Assessment Structure
| Assessment Item | Weight | Relevant Dates |
|---|---|---|
|
Assessment 1: Weekly hand-ins
Assessment FormatIndividual
|
15% |
Start DateNot Applicable
Due DateNot Applicable
|
|
Assessment 2: Class participation
Assessment FormatIndividual
|
10% |
Start DateNot Applicable
Due DateNot Applicable
|
|
Assessment 3: Group Project
Assessment FormatGroup
Short ExtensionYes (5 days)
|
30% | |
|
Assessment 4: Final Exam
Assessment FormatIndividual
|
45% |
Assessment Details
Assessment Overview
This task requires students to demonstrate their understanding of course content to current business events.
Assesses: PLO1, PLO2, PLO3, PLO4
BCom students: myBCom course points for PLO3
Course Learning Outcomes
- CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements.
- CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity.
- CLO3 : Construct written work which is logically and professionally presented.
- CLO4 : Communicate ideas in a succinct and clear manner.
Detailed Assessment Description
Starting from Week 2 and onward, it is required to submit a one-page written response to a set of preparatory questions related to the seminar topic for each teaching week. The questions will be provided one week prior to the seminar, and your responses should be submitted no later than one hour before the respective seminar commences.
It is anticipated that you allocate around 30 minutes for this assessment each week. Your overall grade for this assessment will be calculated based on the average mark of your best five submissions.
Assignment submission Turnitin type
This assignment is submitted through Turnitin and students do not see Turnitin similarity reports.
Assessment 2: Class participation
Assessment Overview
This task requires students to attend class and demonstrate their participation in discussion surrounding weekly questions.
Assesses: PLO1, PLO2, PLO3, PLO5
Course Learning Outcomes
- CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements.
- CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity.
- CLO3 : Construct written work which is logically and professionally presented.
- CLO4 : Communicate ideas in a succinct and clear manner.
- CLO5 : Work collaboratively to complete tasks.
Detailed Assessment Description
A significant portion of each seminar will be devoted to group-based, in-class discussions. Your active and meaningful participation in these discussions is expected. Additionally, you are required to share your comments with the class in response to questions posed by your seminar convenor. Note that mere attendance will not be deemed adequate for class participation.
Your seminar convenor will assess your class participation at the conclusion of the term, taking into account their observations of your engagement in class discussions.
Assignment submission Turnitin type
This is not a Turnitin assignment
Assessment Overview
The major project is aimed at developing your understanding of, and practical skills in financial analysis and valuation. It is also designed to enhance teamwork, analytical and communication skills.
Assesses: PLO1, PLO2, PLO3, PLO4, PLO5
BCom students: myBCom course points for PLO5
Course Learning Outcomes
- CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements.
- CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity.
- CLO3 : Construct written work which is logically and professionally presented.
- CLO4 : Communicate ideas in a succinct and clear manner.
- CLO5 : Work collaboratively to complete tasks.
Detailed Assessment Description
As an equity research analyst, you are tasked with conducting a comprehensive valuation analysis on a designated case company and delivering your investment recommendation for the company's stocks. This is a group assessment, and each group member is expected to contribute equally to the project unless evidence suggests otherwise.
The project consists of both an individual and a group component, representing 5% and 25% of the total course grade, respectively. You will need to form a group of no more than 4 members from the same seminar stream for the project. You are encouraged to voluntarily create a group by the end of Week 2. If forming a group independently is not feasible by this date, your seminar convenor will assign you to a group.
Detailed task descriptions for the individual and group components will be available on Moodle by the end of Week 2 and Week 5, respectively. The individual component is due by the end of Week 5, and the group component is due by the end of Week 9. Refer to the course schedule for specific deadlines.
Assignment submission Turnitin type
This assignment is submitted through Turnitin and students do not see Turnitin similarity reports.
Assessment Overview
The final exam assess whether you have achieved an adequate level of technical competency in financial statement analysis and the ability to draw meaningful inferences from a complex set of information.
This will be based on a case study.
Assesses: PLO1, PLO2, PLO6
Course Learning Outcomes
- CLO1 : Explain the linkage between strategic business analysis, accounting analysis and financial analysis. Identify and utilize relevant information contained information contained in financial statements.
- CLO2 : Identify and analyse issues relating to accounting quality. Prepare and substantiate a valuation that incorporates the strategic, accounting and financial activities of a business entity.
- CLO6 : Identify and assess environmental and sustainability considerations in valuation and portfolio construction.
Detailed Assessment Description
The final exam will take the form of a series of case-based discussion questions, covering all topics studied in ACCT3610. Detailed instructions for the final exam will be made available via Moodle by the end of Week 10.
Assignment submission Turnitin type
This assignment is submitted through Turnitin and students do not see Turnitin similarity reports.
General Assessment Information
As a student at UNSW you are expected to display academic integrity in your work and interactions. Where a student breaches the UNSW Student Code with respect to academic integrity, the University may take disciplinary action under the Student Misconduct Procedure. To assure academic integrity, you may be required to demonstrate reasoning, research and the process of constructing work submitted for assessment.
To assist you in understanding what academic integrity means, and how to ensure that you do comply with the UNSW Student Code, it is strongly recommended that you complete the Working with Academic Integrity module before submitting your first assessment task. It is a free, online self-paced Moodle module that should take about one hour to complete.
You are expected to complete all assessment tasks for your courses in the School of Accounting, Auditing & Taxation. In some courses, there will be a minimum pass mark required on the final exam due to the need to assure individual mastery of specific course learning outcomes for accounting accreditation requirements. Where applicable this is explained in the assessment section of this course outline.
Grading Basis
Standard
Requirements to pass course
In order to pass this course, you must:
- achieve a composite mark of at least 50 out of 100; and
- meet any additional requirements described in the 'General assessment information' section.
You are expected to attempt all assessment requirements in the course.
Course Schedule
| Teaching Week/Module | Activity Type | Content |
|---|---|---|
| Week 1 : 27 May - 2 June | Seminar |
Introduction: Financial statements, corporate disclosures, and fundamental analysis We will begin by addressing essential logistical aspects of the course, such as assessments, delivery methods, and the schedule of topics. Following that, we will provide a comprehensive examination of the corporate financial reporting and disclosure landscape, which serves as the basis for our course exercises. To wrap up, we will share specific observations and significant trends in financial markets related to the influence of fundamental analysis on investment decisions. |
| Reading |
Chapter 1 |
|
| Assessment |
Class participation |
|
| Week 2 : 3 June - 9 June | Seminar |
Strategy Analysis The initial stage of fundamental analysis involves gaining a comprehensive comprehension of the business strategy, specifically how the company engages with its stakeholders in the product markets. We will delve into several stylized models commonly referenced in strategic analysis, such as the 5-force model, SWOT analysis, product life cycles, and more. While you may have encountered these models in a prior course, our emphasis will be on exploring how financial statements and disclosures offer insights into the pivotal strategic attributes of the company. |
| Reading |
Chapter 2 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation |
|
| Week 3 : 10 June - 16 June | Seminar |
Accounting Analysis
We will examine two vital adjustments frequently necessary for preparing financial statement data for fundamental analysis. While accounting numbers serve as the primary source of data for fundamental analysis, the presentations of general-purpose financial statements may not be optimal for this purpose. We will explore methods to restructure financial statements into a format that enhances our ability to profile the business, forecast its future performance, and assess its valuation. Following that, we will assess the quality of firms' accounting numbers and explore how our accounting knowledge can be utilized to eliminate biases and unwanted noise in accounting data. |
| Reading |
Chapters 3 & 4 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation
|
|
| Week 4 : 17 June - 23 June | Seminar |
Financial Analysis Once we ensure that the data at hand are suitable for analysis, we typically start "profiling" the business using a variety of financial ratios. We will thoroughly explore the cohesive utilization of financial ratios to unveil a narrative about a firm. Special attention will be directed towards scrutinizing the profitability of the firm, a central aspect of fundamental analysis. We will investigate how diverse categories of operating, investing, and financing activities can influence both the profitability and associated riskiness of a firm. |
| Reading |
Chapter 5 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation |
|
| Week 5 : 24 June - 30 June | Seminar |
Forecasting We delve into the process of integrating our comprehension of the business into a unified set of forecasts. Our approach involves refining our forecasts by cross-referencing the validity of our assumptions and ensuring internal logical consistency within financial statements. Various methodologies employed by professional analysts in crafting forecasts are introduced, and we illustrate the forecasting procedure with an in-depth case study during class. Furthermore, we engage in discussions about forecasts generated by professional analysts and offer insights on evaluating the quality of their predictions. |
| Reading |
Chapter 6 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation Individual component of the group project is due at 5pm Friday, 28 June 2024. |
|
| Week 7 : 8 July - 14 July | Seminar |
Valuation I We introduce various models for assessing the value of a business, including the dividend discount model, discounted cash flow model, and the abnormal earnings valuation model. We examine their theoretical bases and discuss their merits and limitations in practical applications. |
| Reading |
Chapters 7 & 8 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation |
|
| Week 8 : 15 July - 21 July | Seminar |
Valuation II Our attention turns to the technical aspects involved in the application of valuation models, encompassing tasks such as establishing the discount rate, defining the forecast horizon, making assumptions about terminal values, and performing sensitivity analyses. Additionally, we explore the utilization of valuation models to "backout" implied assumptions embedded in stock prices. This approach empowers us to scrutinize market pricing, potentially challenging it and uncovering investment opportunities. |
| Reading |
Chapters 7 & 8 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation |
|
| Week 9 : 22 July - 28 July | Seminar |
Equity Security Analysis The analysis of equity securities stands out as arguably the most crucial application of fundamental analysis. Our emphasis lies in leveraging fundamental analysis to discern investment opportunities. We explore the proposal, testing, and construction of profitable trading strategies using signals derived from financial reporting. Additionally, we offer an overview of the fund management and equity research industry, highlighting how they employ fundamental analysis in their daily operations. |
| Reading |
Chapter 9 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation Group project report is due at 5pm Friday, 26 July, 2024 |
|
| Week 10 : 29 July - 4 August | Seminar |
Credit Security Analysis We study the impact of financial statements and disclosures on corporate debt markets. Specifically, we delve into how accounting numbers and financial disclosures incorporate valuable signals for assessing the creditworthiness of firms. Our exploration encompasses the influence of accounting information on the design of corporate debt contracts, the development of credit ratings, and the trading of debt securities in secondary markets. Additionally, we introduce various quantitative credit risk models that enable efficient sorting and screening of firms based on their creditworthiness. |
| Reading |
Chapter 10 |
|
| Assessment |
Weekly hand-ins are due 1 hour prior to the start of seminar Class participation
|
Attendance Requirements
Students are strongly encouraged to attend all classes and review lecture recordings.
General Schedule Information
Before attending each seminar, you are expected to read all the assigned readings and familiarise yourself with the basic concepts. You should expect to spend approximately 30% of the time each siminar on group-based discussions or individual presentations. Your participation in the class discussions will contibute to the Class Participation component of the course assessment.
Course Resources
Prescribed Resources
The website for this course is on Moodle.
The textbook for this course is: Palepu, K. G., P. M. Healy, S. Wright, M. Bradbury, J. Coulton, Business Analysis and Valuation Using Financial Statements: Text and Cases, Asia Pacific 3rd Edition, Cengage Learning, 2021. There is an ebook version of this text that you can download from the UNSW Library website for free (you will only be able to download a limited number of chapters at a time). See Moodle for detailed instructions on how to access the text from the Library. You can also obtain a full e-book from the publisher (Cengage). If you use the code "TAKE10OFF" you will receive a 10% discount.