Accounting and Financial Statement Analysis

Accounting and Financial Statement Analysis

Professor Anna Maria Fellegara and Professor Davide Galli

COURSE AIMS

The course aims to familiarise first-year students with the study of financial statements for going concerns. Starting from accounting terminology, the course looks at issues concerning the determination of annual income generated from operations and the related working capital. The values that originate from business dealings must be recognized, classified and registered in order to allow for constructing periodic summaries about the components of working capital and earnings. The valuation of the components of income and capital as part of the reporting to stakeholders are the final elements of the theoretical framework concerning annual financial statements. Another objective of the course is to provide the student with tools for reading and analysing financial statements, from a business-financial perspective. The course will also present reclassification techniques and analyses of ratios and financial flows for the purpose of evaluating the overall business profile of a company from the standpoint of its capital, earnings and financial position.

LEARNING OUTCOMES

-An understanding of the valuation criteria defined by national accounting principles and some of the criteria contained in the international accounting principles (IAS/IFRS).

-An understanding of the methods for preparing corporate financial statements, in accordance with prevailing regulations in Italy.

-A capacity to analyse and interpret trends in earnings, financial position, and the capital accounts in relation to business management, with the construction and interpretation of the main financial statement ratios and the statement of changes in financial position.

COURSE CONTENT

Module 1 – Financial statements

-The financial statement information system: functions, addressees, and structure.

-The rules of reference and international accounting principles (overview).

-The notes to the financial statements and the report on operations.

-Financial statements prepared pursuant to the Italian Civil Code.

-Valuation of inventories.

-Valuation of commissioned work in progress.

-Valuation of tangible and intangible fixed assets.

-Valuation of financial assets (overview).

-Valuation of receivables and foreign-currency denominated transactions/entries.

-Valuation of reserves for risks and charges, and payables.

-Income taxes (overview).

-Examining and interpreting annual financial statements.

Module 2 – Financial statement analysis

-Formats for reclassification of the income statement and balance sheet.

-Definition and significance of the key indicators of solidity, profitability, liquidity and growth.

-The statement of changes in financial position: purposes, contents and structure.

-Different configurations of the statement of changes in financial position.

-Methodology for constructing the statement of changes in financial position and the statement's information potential.

READING LIST

P. Andrei-A. M. Fellegara,Contabilità e bilancio, Giappichelli, Turin, 2014.

C. Teodori, L’analisi di bilancio,Giappichelli, Turin, 2008.

Readings and cases posted in the blackboard platform are an integral part of the course and should be considered as textbooks.

Recommendedreading:

C. Teodori, Il rendiconto finanziario: caratteristiche, ruolo informativo ed interpretazione,Giappichelli, Turin, 2009.

R. Silvi, Analisi di Bilancio: la prospettiva manageriale, Mc Graw Hill, 2012.

TEACHING METHOD

The course will be taught through lectures on theory and assignments.

ASSESSMENT METHOD

Written examination on the entire course programme (Module 1 and Module 2). The exam includes reading and analysis of the financial statements of a company and includes six questions, one concerning the reading of accounting data in the financial statements (7 points out of 30), 2 related to the knowledge of the valuation criteria (8 points out of 30), two related to the reclassification of the income statement and balance sheet (8 points out of 30) and one concerning the financial statement analysis by indexes (7 points out of 30). The test has a duration of 120 minutes

Students attending class on a regular basis will have the option of being graded based on a separate exam at the end of each of the two modules. The first test includes three questions one concerning the reading of accounting data in the financial statements (14 points out of 30), two of which related to the knowledge of the valuation criteria (16 points out of 30). The second test includes three questions, two of which related to the reclassification of the income statement and balance sheet (16 points out of 30) and one concerning financial statement analysis by indexes (14 points out of 30). Each intermediate test has a duration of 90 minutes.

NOTES

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