FINANCIAL STATEMENT ANALYSIS AND EVALUATION

This course is designed to provide students with the theoretical foundations and practical tools required to analyze and evaluate financial statements. The aim is to prepare future managers and leaders to assess the value and performance of businesses in both quantitative and qualitative terms.

Through a structured framework, the course equips participants to understand the complexities of financial decision-making in today's dynamic business environment, emphasizing the importance of going beyond mere numbers and models to understand the broader implications of financial data.

The course is centered on two fundamental questions:

1. How to value a business?
2. How to analyze a company’s financial performance?

By addressing these questions, students will develop the necessary skills to make informed decisions that align with sustainable and responsible management practices.

Upon successful completion of this course, students will be able to:

1. Identify and understand the key financial statements (balance sheet, income statement, cash flow statement) and their components.
2. Evaluate a company’s performance using both qualitative and quantitative approaches.
3. Apply financial analysis tools, including the use of Excel for data analysis and modeling.
4. Collaborate effectively in teams to solve real-world financial problems.

Successful completion of the ET4004 Accounting and Business Administration exam is a prerequisite for enrolling in this course.

The course is accessible to all students with an interest in finance and business analysis.

It is recommended to download Excel (all students can download Microsoft Office 365 for free in partnership with Ca' Foscari) and Wooclap onto their personal computers.

1. Introduction to Financial Statement Analysis

This module introduces the objectives and significance of financial analysis in corporate decision-making and investment evaluation. Students will explore the fundamental principles underlying financial reporting and accounting, with particular emphasis on understanding the role of financial statements in assessing a company’s overall performance.

2. Accounting Policies and Financial Reporting Principles

This section of the course focuses on the key differences between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), providing students with the foundational knowledge necessary to understand how accounting policies influence financial analysis. In addition, students will gain an in-depth understanding of the Balance Sheet, Income Statement, and Cash Flow Statement, exploring their interrelationships and the insights they provide regarding a company’s financial standing.

3. Financial Ratio Analysis

A central component of the course, financial ratio analysis, will enable students to assess a company’s performance through the application of key profitability, liquidity, solvency, and efficiency ratios. Key metrics covered will include:
a) Profitability ratios, such as Return on Equity (ROE), Return on Assets (ROA), Return on Invested Capital (ROIC), Net Profit Margin, and the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin.
b) Liquidity ratios, including the Current Ratio and Quick Ratio.
c) Solvency ratios, such as the Debt-to-Equity Ratio, and Interest Coverage Ratio.
d) Efficiency ratios, such as Asset Turnover and Inventory Turnover.

4. Cash Flow Analysis

This module examines various methods of cash flow analysis, including a detailed exploration of the differences between direct and indirect cash flow methods. Students will also delve into the concept of free cash flow, critically assessing its importance in corporate valuation and long-term financial sustainability.

5. Business Valuation Techniques

The course explores advanced business valuation techniques, focusing on the following methodologies:
a. Discounted Cash Flow (DCF) Analysis, a technique that discounts future cash flows to their present value in order to estimate the value of a business.
b. Net Present Value (NPV), a method used to calculate the profitability of an investment based on the difference between the present value of cash inflows and outflows.
c. Market-Based Valuation Approaches, which involve the use of market valuation ratios, such as Price-to-Earnings (P/E), Price-to-Book (P/B), and EV/EBITDA, as well as Comparable Company Analysis (Comps) and Precedent Transactions Analysis. These approaches enable the comparison of a company’s market value against various financial metrics.

Throughout the course, students will engage in case studies and practical applications, providing them with the opportunity to apply theoretical knowledge to real-world situations. This approach will help develop skills in financial statement analysis, the identification of financial misstatements, and the ability to make informed investment decisions. These skills will prepare students for successful careers in corporate finance, investment banking, private equity, and financial consulting.

Course materials, including lecture slides and case studies, will be provided by the instructor.

Optional readings for students passionate about investment analysis:
• "Security Analysis" and "The Intelligent Investor" by Benjamin Graham.
• "Warren Buffett Wealth: Principles and Practical Methods Used by the World's Greatest Investor" by Robert Miles.

No textbook purchase is required.

The final grade will be based on:

• A written final exam.
• Assignments/group work completed during the course.

written

• Interactive lectures.
• Case study discussions.
• Group projects to encourage collaboration and practical application of concepts.

English

EXAM ENROLMENT PROBLEMS. If students experience problems when enrolling online to the exam, they have to send an email to the Economics Campus before the closing date of exam enrolment. Students are not admitted to the exam if they are not enrolled online to the exam. Students are not admitted to the exam after the closing date of exam enrolment online.
ACCESSIBILITY, DISABILITY, AND INCLUSION. ACCOMMODATION AND SUPPORT SERVICES FOR STUDENTS WITH DISABILITIES AND STUDENTS WITH SPECIFIC LEARNING IMPAIRMENTS. Ca’ Foscari abides by Italian Law (Law 17/1999; Law 170/2010) regarding support services and accommodation available to students with disabilities. This includes students with mobility, visual, hearing, and other disabilities (Law 17/1999), and specific learning impairments (Law 170/2010). If you have a disability or impairment that requires accommodations (i.e., alternate testing, readers, note takers or interpreters), please contact the Disability and Accessibility Offices in Student Services at the e-mail address disabilita@unive.it

This subject deals with topics related to the macro-area "Circular economy, innovation, work" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development