Financial Statements Analysis (20839)

Degree/study: Degree in Economics
Year: 2nd
Term: 1st
Number of ECTS credits: 5 credits
Hours of studi dedication: 150 hours
Teaching language or languages: catalan
Teaching Staff: Carlos Vivas, Ester Oliveras, Josep L. Boned and Fina Alemany

1. Presentation of the subject

This subject deals with business analysis in terms of financial statements. After an introduction to the subject's main objectives, a summary of the basic concepts regarding financial statements is carried out. Then, the analysis of the statement of condition, the profit and loss account, the profitability and the working capital are addressed.

Next, the analysis with sectorial data, the analysis of consolidated financial statements and international analysis are studied.

It also focuses on the effect of inflation in annual accounts and to finish with, it is presented the integral analysis of the financial statements.

We will study in depth every issue, with practical cases which can lead to a better understanding of the theoretical concepts.

There could be the possibility that some guest speakers may participate in some sessions so as to give their particular views of the subjects from the business world's side. 

In order to arrange a meeting, please contact us on the email.

2. Competences to be attained

2.1. GENERAL COMPETENCES

INSTRUMENTAL SKILLS

1. - Competences for oral and written communication

0. Giving speeches in English
0. Understanding of texts in English
0. Drawing up economic-financial analysis reports in Catalan / Spanish

2. - Capability of decision making: given some annual accounts, they must provide conclusions as for the context.

3. - Abilities for the application of basic Mathematics to problems resolution.

4. - Use of basic computer tools (text processor, spreadsheets, PowerPoint) for works' execution, documentation research and presentation of the results.

INTERPERSONAL SKILLS

5. - To have judgement and critical skills when providing conclusions which are based on the results obtained from the economic-financial analysis.

6. - Being proactive in the research of information for problems resolution.

7. - Team-work capacity: realisation of professional world, space to contrast different solutions, coordination needs

8. - To have an aptitude for finding solutions adapted to professional ethics.

SYSTEMIC SKILLS

9. - To have capacity for the management of information: selection of the appropriate sources and data cleaning in team-works' elaboration

10. - Experiential learning

11.- Application of theoretical knowledge and analysis tools in real situations.

12.- To have the capacity of considering the adaptation of the company to the new environment International Financial Reporting Standards, IFRS)

2.2. SPECIFIC COMPETENCES

1. - Capacity of assimilation of basic knowledge of the economic-financial area.
a. Identification of objectives, limitations and users of the analysis of the annual accounts
b. Awareness of the existence of complementary information in the economic-financial analysis

2. - Ability to relate previous knowledge in the field of the company's economic-financial analysis.
a. Internalisation of the basic concepts concerning: statement of condition, profit and loss account, value-added statement, treasury flow statement
b. Identification of annual accounts' informative documents: report, report on management and audit report.
c. Ability to identify unethical business practices in annual accounts: concealment, manipulation, creative accounting

3.- Capacity of diagnosis of the company's properties and financial situation
a. Abilities of using analysis techniques of: statement of condition, profit and loss account, profitability and working capital
b. Assessment of the evolution of: incomes, expenses, margins and results of the profit and loss account.
c. Getting to understand the variables which have an influence on the profitability's evolution
d. Comparison with other companies of the sector's data
e. Interpretation of consolidated statement
f. Capacity of correcting statement of conditions and profit and loss accounts counteracting the inflation's consequences (introduction)
g. Capacity for international analysis of financial statements

4. - Capacity of offering results concerning financial statements
a. Integral analysis of financial statements
b. Problem identification and resolution through the application of economic-financial analysis techniques

The student must have completed the core subject Introduction to Financial Accounting.

3. Contents

There is a description below of the contents merged by competences. A distinction is made between concepts, procedures and attitudes, as far as possible. 

3.1. GENERAL COMPETENCES

Procedures: 

• Practical cases resolution
• Oral presentations of practical exercises
• Reading texts in English
• Report writing of economic-financial analysis
• Application of Mathematics in problems solving
• Use of basic computer tools for doing assignments, research and documentation management and presentation of results
• Experience based learning
• Application of theoretical knowledge and analysis tools to practice, with real data

Attitudes: 

• Analytical
• Opinion and criticism in the provided conclusions, based on the obtained results
• Showing initiative in information research for problems solving
• To be able to work in a team
• Finding solutions adapted to professional ethics
• Empathic communication
• Assertive communication

3.2. SPECIFIC COMPETENCES

1. - Capacity of assimilation of the basic knowledge of economic-financial area
a.  Identification of aims, limitations and users of the analysis of annual accounts
Concepts: Concept of financial statements' analysis, Companies problems and their causes, Limitations of the financial statements' analysis
Procedures: Business analysis and diagnosis, Survey for a company's preliminary diagnosis
b. Awareness of the existence of complementary information in the economic-financial analysis
Concepts: Complementary data in the financial statement analysis

2. - Capacity of relating previous knowledge in the field of the company's economic-financial analysis.
a. Internalization of basic concepts concerning: statement of condition, profit and loss account, added value statement and treasury flows statement
Concepts: Concept of statement of condition, profit and loss account, added value statement and treasury flows statement, valuation rules for assets and liabilities.
Procedures: Ordering the statement of condition and profit and loss account, preparation of the treasury flows statement.
Attitudes: Attending the accounting rules
b. Identification of annual accounts' informative documents: annual report, management report and audit report
Concepts: Concepts of annual report, management report and account's audit report
c. Ability to identify unethical business practices in annual accounts: concealment, manipulation, creative accounting
Concepts: Concept of creative accounting
Attitudes: Professional ethics and respect for accounting rules

3. Capacity of diagnosis of the company's assets and financial condition. 

0. Ability in the use of analysis' techniques of: statement of condition, profit and loss account, profitability, working capital
0. Evaluation of the evolution of: income, expenses, margins, and the results of the profit and loss account
0. Understanding the variables which have an influence on the evolution of profitability

Concepts:
Statement of condition: analysis' techniques, statement of source and application of funds, the main evaluation ratios, ratios' predicting power: one-dimensional and multi-dimensional views
Profit and loss account: the analysis' techniques, the break-even point, operative leverage, concept of productivity, efficacy and efficiency
Profitability: concept of economic profitability and financial profitability, concept of financial leverage, Self-financing and growth, Indicators for the analysis of companies listing in the stock market
Working capital: concept of apparent and necessary working capital, concept of maturity cycle

Procedures:

Use of the balance analysis' techniques, main ratios calculation, one-dimensional and multi-dimensional views

Use of profit and loss account's analysis techniques, calculation of percentages and charts, Sales ratio analysis, product margin analysis, calculation of break-even point, expenses analysis, productivity, efficacy and efficiency analysis, quality level analysis

Calculation of profitability: Economic profitability or yield, Financial profitability, Financial profitability decomposition, Financial leverage analysis, Self-financing diagnosis process, Calculation of the company's growth capacity, Use of indicators for the analysis of companies listing in the stock market, Calculation of stock ratios

Calculation and interpretation of treasury flows statement

Attitudes: Analytic, decisive, accuracy, empathic capacity, assertive communication

d. Comparison with other companies of the sector's data

Concepts: Average data, limitations of sectorial information
Procedures: Sectorial information attainment: database, average data formulation, comparisons with successful and failed companies
Attitudes: Analytic, decisive, accuracy, empathic capacity, assertive communication

e. Interpretation of consolidated statements

Concepts: Concept of dominant, dominated multi-group and associated society,
Conditions which should be met by society groups to be under the obligation of consolidating annual accounts, situations which excuse society groups from the obligation of consolidating, Models of consolidated annual accounts, Specific accounts of consolidated statements
Procedures: Introduction to consolidation methods and procedures, Introduction to the use of consolidated annual accounts models, Interpretation of consolidated statements
Attitudes: Respect for accounting regulations

f. Capacity of correcting statement of conditions and profit and loss accounts counteracting the inflation's consequences (introduction)

Concepts: Concept of monetary and non-monetary items in annual accounts, Inflation in annual accounts, Concept of adjustment of subsidiary accounts
Procedures: Use of the systems for the adjustment of accounts by inflation, Adjustment of subsidiary accounts
Attitudes: Analytic, decisive, accuracy, empathic capacity, assertive communication

g. Capacity for international analysis of financial statements
Concepts: International differences in Accountancy, Current homogenisation actions of international accounting information 
Procedures: Use of conversion methods of annual accounts in foreign currency
Attitudes: Respect for international accounting regulations

4. Capacity of offering results concerning financial statements

a. Integral analysis of financial statements
b. Problem identification and resolution through the application of economic-financial analysis techniques

Concepts: Concept of information integration of different analysis, Concept of ratio pyramids and balanced scorecard. Elements to take into consideration in order to make effective analysis reports of financial statements
Procedures: integration of different analysis information, Creation of the report of financial statements analysis
Attitudes: Analytic, decisive, accuracy, Respect for international accounting regulations, empathic capacity, assertive communication

4. Assessment

4.1 GENERAL ASSESSMENT CRITERIA

In terms of activities:

4.1.1. FIRST PART 

Final assessment through an exam, at the end of the term which will account for 50% of the grade. Compulsory

The exam consists of two parts. The first one is on theoretical concepts and accounts for 30% of the total. In the second part a practical case must be developed and it accounts for 70% of the total grade. The estimated time to take the exam is two hours.

Among other aspects, it will be evaluated the ability of problem resolution, the application of theoretical knowledge and analysis tools in real situations and learning through experience.

In order to pass the subject it is essential to pass the exam.

4.1.2. SECOND PART

Continuous assessment through a teamwork assignment in which students are expected to apply in a real company the concepts studied in the subject. It will account for 40% of the grade. Compulsory.

During the term there will be group tutorials with lecturers. Meetings will be held once a fortnight.

Instructions for the execution of the Final Assignment

With the Final Assignment students are expected to integrate the different parts which make up the subject's syllabus. At the same time, it promotes teamwork, written essays' creation, oral reports' presentation and the contact with business reality.

Involvement, efficacy, efficiency, accuracy, ability for information research, capability of problems resolution and ability to use basic computer tools for written presentation will be valued, among others. 

In order to carry out this Final Assignment, students must choose during the first weeks of the course, a real company and apply, progressively, the different topics which are dealt with during the programme's development. 

In case that the information that appears is confidential, an indication should be made on the cover of the Assignment. Should this be the case, the lecturer must be warned so that both the correction and the handing over are made in front of the students.

When the correction is finished the lecturer will hand the Assignment over to the students.

On the cover of the Assignment it must also appear, next to the students' names and surnames, the participation percentage of each member in the whole work team. Thereby, students who have participated more actively in the Assignment can be taken into consideration.

Non confidential projects must be handed in, the original and copy from the last week of classes and not later than the final exam day. The copy of the Assignments will be available for students on the exam's review day at the lecturer's office. 

The index proposed for the assignment is the following: 

0. Objectives of the assignment
0. Description of the company and its sector
0. Diagnosis of the strong and weak points and cause-effect diagram
0. Recommendation proposal
0. Quantitative demonstration of the recommendations' efficiency
   Annex 1: Used documentation; annual accounts, sectorial data, etc  
   Annex 2: Calculations
   Annex 3: Other information (newspaper clippings, articles, etc)
   Used Bibliography

4.1.3 THIRD PART  

Continuing assessment through weekly practical exercises which will account for 10% of the grade. Compulsory.

The 10% includes: written presentation of some practices, oral presentation in class in groups throughout the year (ORAL PRESENTATIONS OF PRACTICAL CASES IN CLASS MUST BE MAXIMUM 10 MINUTES LONG) participation and attendance to every practical classes.

Team working, case supporting in front of the lecturer and the community, ability of critical spirit and capacity of problems resolution will be, among others, valued. 

4.1.4 OTHERS

Self-evaluation exercises will not have weight in the final grade. Optional.

Exercises are multiple-choice; there are four options and only one of them is the correct. These exercises will serve as a barometer for students to check how their knowledge progresses throughout the course. In Campus Global there are self-evaluation exercises for every theory chapter. 

An abstract table of the general assessment criteria above explained is listed below: 

GENERAL ASSESSMENT CRITERIA
Final Assessment	Final Exam (at the end of the term)	50% of the grade
Continuing Assessment	Team Work (with face-to-face sessions of group tutorials with the lecturer every fortnight)	40% of the grade
	Weekly practical exercises (face-to-face sessions every week)	10% of the grade
Others	Self-evaluation exercises	They will not have weight on the final grade. Optional for students.

5. Bibliography and teaching resources

Students will have at their disposal (basic and complementary) bibliography, a web page upon which they can have access to the resources posted on the Campus Global and paper support material at the University Reprography center. 

Mentioned material classes are detailed below.

5.1. Basic bibliography

Subject's notes put out on the Campus Global Moodle.

5.2. Complementary bibliography

ACCID. Comprendre les normes internacionals de comptabilitat. Barcelona: Gestió 2000, 2003.
ACCID, Nou Pla General de Comptabilitat. Barcelona: 2008.
Amat, O. Anàlisi integral d'empreses. Barcelona: Profit Editorial, 2008.

5.3. Teaching resources

Aula Global. If you access via the University Website: www.upf.edu, Campus Global section

- Teaching Plan (MUST BE BROUGHT TO EVERY SESSION OF THE SUBJECT)
- Practical Cases
- Self-assessment exercises

6. Methodology

LEARNING ACTIVITIES 

The subject's methodology is not exclusively based on the lecturer's theory sessions, but combined with activities such us:
- Weekly exercises
- Presentations in class
- Team working
- Self-assessment exercises
- Oral participation 

These activities will account for 50% of the total; see section Assessment for percentage concreteness, and the final exam will account for the remaining 50%. Note that in team working cases, the teacher will hold tutorials with the groups. Besides, the teacher will be at the students' disposal for any queries about the subject at the corresponding consultation hours. 

In chronological terms, the student's suitable progression in the course involves, in general, the following stages: 

0. Attendance to (theory) general session
0. Personal work: complement with basic bibliography reading and the rest of teaching resources he can make use of
0. Personal work: doing self-assessment exercises
0. Team work: doing weekly exercises to be presented at the practical class and the group written assignment to be presented at the end of the term
0. Sessions of the work group with the lecturer 

Once classes have finished: 

0. Personal study for the preparation of the written exam
0. Written exam's execution 

In the subject's programme it appears a list of the competences, resources and timing of the activities to be learned, by sessions.

7. Planning of activities

The subject has 5 ECTS which correspond to 150 hours of dedication on the part of the student. This total amount of hours is distributed in: 

• Theory session attendance: 30 hrs
• Practical session attendance: 9 hrs
• Group tutorials attendance: 5 hrs
• Bibliographical reading and exercises' solving: 39 hrs
• Preparation of the practical case's presentation: 1 hr
• Group Assignment elaboration: 34 hrs
• Pre-test study: 30 hrs
• Test taking: 2 hrs 

The subject is, therefore, structured as follows: 

Theory sessions: They are sessions with the whole group. During the first part of the session the lecturer introduces theoretical concepts and the second part is dedicated to the application of a practical case. 

Seminar sessions: They are sessions with part of the group for the whole group. In most sessions there will be students' presentations of practical cases' reports. Debate and students participation will be valued. 

In order to succeed in the subject, students have at their disposal a guide of teaching resources with detailed material and where they can be found.

The detailed programme by sessions is given below.

TENTATIVE WEEKLY PLANNING
Week	ACTIVITIES			RESOURCES
	Topic	Cases to be solved in  theory sesssions	Cases for seminars or practicals	Besides the powerpoint presentations avaialbe in Aula Global.
1	Subject presentation 1.Introduction and financial statements	Case ENRON	Case Bon Preu SAU	Notes Aula Global: chapters 1and  2
2	2.Balance Sheet Analysis	Case Habitat	Case Telecinco	Notes Aula Global: chapters 3 and 4
3.	3.Profit and loss account Analysis	Case Sky Europe	Case Corte Inglés	Notes Aula Global: chapter 5
4.	4.Return analysis	Case Inditex	Case Ryanair	Notes Aula Global: chapter 6
5.	5.Working capital analysis (I) Cash flow statement	Case Mercadona	Case   Computer Solutions	Notes Aula Global: chapter 7 Technical note Cash Flow Statement
6.	5.Working capital analysis (I) Cash flow statement	Case Air Comet	Case Caprabo	Notes Aula Global: chapters 7 and 8
7.	6. Analysis of Consolidated accounts	Case Easyjet	Case Group  Bon Preu	Notes Aula Global: chapter 9
8.	7.Inflation and financial statements analysis	Case Concha y Toro	Exercise adjustments for inflation	Notes Aula Global: chapter 10
9.	8.Analysis of international financial statements.	Case Euro Disney	Case Phillips Accounts conversions exercises.	Notes Aula Global: chapter 11
10.	9.Integrate Analysis	Example exam:  Furniture Peris	Example exam.  Port Aventura Final assignment handout.	Notes Aula Global: chapter 12