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Assessment Assessment task 1: Assignment (Group)
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SUBJECT OUTLINE
22319 Financial Statement Analysis (Capstone)
Subject coordinator
Dr Hayley Ma
Email Le.Ma@uts.edu.au
You can also contact Hayley via e-mail at the address above, or via UTSOnline.
Subject description
The aim of this course is to demonstrate and apply a framework for business analysis and valuation using financial
statement data. The emphasis of the course is on translating the tools of business analysis and valuation into practical
situations. To achieve this, the course is relatively case intensive, with this method used to develop key skills as well as
demonstrating their application. The course is intended for students interested in business consulting, investment
banking, business analysis and corporate lending. Given the increasing trend towards a business analysis-based
approach to auditing and assurance services, it is also relevant to those interested in public accounting.
Subject learning objectives (SLOs)
Upon successful completion of this subject students should be able to:
1. understand the basic techniques of financial analysis and business valuation
2. appreciate the linkage between industry analysis, strategic business analysis, accounting analysis, financial
analysis and prospective analysis
3. understand how to use various different valuation models, as well as the benefits and limitations of those models
Course intended learning outcomes (CILOs)
This subject also contributes specifically to the following program learning objectives:
Critically analyse relevant concepts to understand practice in business and related professions in a global
workplace (1.1)
Demonstrate inter-relationships between differing business and related disciplines (1.2)
Locate and critically evaluate relevant data and literature to address business problems through a research
approach (2.1)
Apply critical and creative thinking to address issues in business (2.2)
Contribution to the development of graduate attributes
This course focuses on establishing a clear linkage between several skills normally acquired by business students so
as to enable them to conduct rigorous business analysis and prepare sound business valuations. The course
combines skills in business strategy, finance and accounting, so as to enable students to apply these methods of
analysis in combination. It also contributes to the accounting major by demonstrating the analysis of accounting quality
and its implications for financial analysis and valuation.
Course area UTS: Business
Delivery Spring 2017; City
Credit points 6cp
Requisite(s) 22420 Accounting Standards and Regulations AND 25300 Fundamentals of
Business Finance
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.
Result type Grade and marks
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This subject contributes to the development of the following graduate attributes:
Business knowledge and concepts
Critical thinking, creativity and analytical skills
Teaching and learning strategies
The subject will be taught using a combination of large lectures and smaller tutorials. The lectures provide the
structure of the topic area, discussion of the theory and some practical examples. Tutorials provide an opportunity to
discuss ideas, issues and make practical application of the theory, as well as encouraging students to think in a
creative manner to solve real world problems, using learning from other core subjects. Extensive use is made of the
UTS web-based communication tool UTSOnline, which will be used to share information, provide feedback and
encourage interaction between staff and students. Students will also use appropriate computer software to complete
assigned tasks.
All students will be provided with the opportunity for initial feedback on their performance in the subject during the first
six weeks of the semester, for example, online quizzes, tutorial exercises, draft assignments and other assessment
methods. Further feedback will be provided in relation to submitted assessment tasks.
Content (topics)
Industry and strategy analysis: Understanding the strategic decisions businesses make to create/maximize
shareholder value, as well as the constraints within which this occurs.
Accounting analysis: Understanding the link between strategic considerations and the financial statements,
including identification of the quality of accounting numbers.
Financial analysis: Assessing the financial performance and position of a business using ratio analysis and cash
flow analysis, in light of the strategic direction and accounting quality identified.
Prospective analysis: Forecasting financial results.
Prospective analysis: Valuation models - Understanding investment returns, and how valuation models are
developed to anticipate abnormal returns.
Prospective analysis: Valuation models - Implementation
Application: Using forecasted financial statements to develop a valuation, and the assessment of that value’s
sensitivity to strategic, accounting and financial considerations.
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Program
Week/Session Dates Description
1 24 Jul Preparation Week
Work through the UTS Online landing page
Read through the Subject Outline
Revise subject material from previous subjects
Class attendance is mandatory for this week.
2 31 Jul Lecture 1: Introduction to Financial Statement Analysis
Preparation: Read Chapter 1
3 7 Aug Lecture 2: Industry and Strategy Analysis
Preparation: Read Chapter 2
Tutorial: Refer UTS Online
4 14 Aug Lecture 3: Accounting Analysis
Preparation: Read Chapter 3 and Chapter 4
Tutorial: Refer UTS Online
5 21 Aug Lecture 4: Financial Analysis (Part 1)
Preparation: Read Chapter 9 from Penman textbook
Tutorial: Refer UTS Online
6 28 Aug Lecture 5: Financial Analysis (Part 2)
Preparation: Read Chapter 5
Tutorial: Refer UTS Online
Notes:
UTSOnline: Submit Group Assignment Through Turnitin
*Please make sure only ONE MEMBER from the group submits the assignment to
Turnitin.
7 4 Sep Lecture 6: Prospective Analysis - Forecasting
Preparation: Read Chapter 6
Tutorial: Refer UTS Online
11 Sep StuVac
8 18 Sep Lecture 7: Prospective Analysis - Valuation (Part 1)
Preparation: Read Chapter 7
Tutorial: Refer UTS Online
Notes:
UTSOnline: Submit Individual Assignment Part A Through Turnitin
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9 25 Sep Lecture 8: Prospective Analysis - Valuation (Part 2)
Preparation: Read Chapter 7 and Chapter 8 pages 262-268
Tutorial: Refer UTS Online
10 2 Oct Lecture 9: Prospective Analysis - Valuation (Part 3)
Preparation: Read Chapter 8 pages 269-284 and Chapter 13 from Penman textbook
pages 449-453
Tutorial: Refer UTS Online
11 9 Oct Lecture 10: Business Analysis and Valuation Application
Preparation: Read Chapter 9 and Chapter 11
Tutorial: Refer UTS Online
12 16 Oct Lecture 11: Conclusion and Overview
Tutorial: Refer UTS Online
Notes:
UTSOnline: Submit Individual Assignment Part B Through Turnitin
Additional information
Emailing
You must only use your UTS account when sending emails to your lecturer or other members of UTS staff. Mail
providers that are not UTS are not read and automatically deleted.
In each email that you send please provide:
a) Your full name: this must be the name that you used to enrol in the subject,
b) Your student number,
c) and use the subject number for the beginning of the email subject field e.g.: "22319: need your help"
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Assessment
Assessment task 1: Assignment (Group)
Objective(s): This addresses subject learning objective(s):
1 and 2
Weight: 20%
Task: This assignment should be completed in groups of up to five people. Each group is required to select
an Australian listed company from a company list provided on UTSOnline. It is required that groups
should be finalized by the end of week 2 and a company is chosen by the end of week 3.
Perform macroeconomic analysis, industry analysis, business strategy analysis and accounting
analysis based on the chosen company, and produce a professional group report as though you were
a prospective management consultant. The analysis should be informed by various sources of
publically available information such as the official website of the company and industry reports, and
should be supported by ABS data or other statistical information. The report has a total mark of 20
and should cover:
Macroeconomic Analysis: Describe the company’s economic environment and evaluate how this
has impacted historic firm performance and is likely relevant to future performance. (allocated 4
marks)
What has been going on in the global economy and the individual economies that affect your
company over the last 5 years? What is predicted to happen? How is it related your company?
Identify and analyse at least five relevant economics factors that have significantly influenced your
company’s performance. These five economic factors must include GDP, inflation and interest
rate. Additional two economic factors may include but not limited to foreign exchange rates, oil
prices, population growth, consumer demands, etc.
Industry Analysis: Evaluate the level of competition in the industry or industries that your company
operates in using Porter’s Five Forces framework. (allocated 5 marks)
Form a conclusion for each force and for the industry overall. That is, the level of competition is
high, moderate or low.
Business Strategy Analysis: Identify and discuss the key success factors and the key risks of the
company’s strategy. Also evaluate the sustainability of profits generated by the strategy in the future.
(allocated 5 marks)
Accounting Analysis: Use the six-step accounting analysis framework to assess the degree to
which the firm’s accounting reflects the underlying business reality. Identify any accounting
distortions if there is any and evaluate their impact on profits and the sustainability of profits.
(allocated 4 marks)
Overall Report Quality: The report should be readily comprehensible, condensed and within the
word limit. Information should be collected from various reliable sources to inform analysis and
references are properly cited. Tables and graphs should be used to effectively present information.
(allocated 2 marks)
If the company operates in several economic regions, industries or has several business segments,
only include material business operations in the analysis. It is material if it generates or will generate
more than 10% of the company’s total sales revenue.
Length: 5000 words (exclusive of references and appendices). +/- 10% is acceptable. Appendices are limited
to a maximum of 10 pages. Please use a font size of 11, 2.5 cm page margins and a line spacing of
1.5.
Due: Monday 28 Aug 5pm
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Due: Monday 28 Aug 5pm
Further
information:
Submission Requirements:
1. Only a soft copy of the group report should be submitted by only one nominated group member
through TurnitIn on UTS Online.
2. All group reports should have a cover page which includes student name and ID of each group
member and a word count.
3. Students are able to submit late assignments after the submission deadline to TurnitIn. However,
for each work day that the assignment is late, the assignment will lose 10% of the raw assignment
mark.
4. Students may submit their group report to TurninIn as many times as they like prior to the
submission deadline.
5. TurnitIn checks % similarity to materials from other assignments, websites and journal articles
within the Business School and from world-wide institutions. Students should be warned that copying
materials from their own assignments submitted for other subjects or in previous semesters is also
considered as plagiarism and hence an academic offence.
Assessment task 2: Assignment (Individual)
Objective(s): This addresses subject learning objective(s):
1, 2 and 3
This addresses program learning objectives(s):
1.1, 1.2, 2.1 and 2.2
Weight: 40%
Task: Part A Reformatted Financial Statements and Financial Analysis (10 %)
Based on the same company chosen in the group assignment, reformat the company’s financial
statements for the past five years in an excel spreadsheet. Produce an individual professional report
where ratio and cash flow analysis is performed to evaluate the current and past performance of the
company and its sustainability in the future. The report should discuss in details what happened and
why the ratios/cash flows changed. Specifically, the report should include the following discussions:
Reformatting: (allocated 2 marks)
Present detailed past five years’ reformatted financial statements as an appendix in the report.
Ratio analysis: (allocated 5 marks)
Calculate and discuss key ratios such as ROE, RNOA, PM, ATO, FLEV and NBC.
Break down and analyse PM and ATO ratios in further details. Identify and discuss three significant
expense items that have caused major changes in profit margin. Identify and discuss three major
assets or liabilities whose turnover ratios have contributed to the overall change in assets
efficiency.
Briefly describe the ratios trend. The analysis should elaborate on the economic, industry and
business factors that drive the changes in ratios. The discussion should consistently reflect the
same firm fundamentals identified in the group report.
Cash flow analysis: (allocated 2 marks)
Calculate liquidity, solvency and cash flow ratios.
Analyse financial risk and cash flow management of the company based on ratios.
Overall Report Quality: The report should be readily comprehensible, condensed and within the
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word limit. Information should be collected from various reliable sources to inform analysis and
references are properly cited. Tables and graphs should be used to effectively present information.
(allocated 1 mark)
Part B Prospective Analysis and Application (30 %)
Based on the same company chosen for the group and first individual assignment, produce an
individual professional report on the prospective analysis of the company. Forecast the future
financial performance of your company for the next five years and beyond. Use four valuation models,
i.e. Dividend Discount Model, Residual Income Model, Residual Operating Income Model and Free
Cash Flow Model, to produce an estimate of the firm’s share value, and compare to its current stock
price. Perform sensitivity analysis on key forecasting assumptions using only Residual Operating
Income Model and discuss the results. Based on sensitivity analysis and as a potential management
consultant to your chosen firm, provide a discussion as to the possible opportunities for improvement,
and potential challenges for the firm. Provide specific and reasonable remedies for these concerns.
The report should cover:
Forecasting: (allocated 10 marks)
Prepare your forecasts in an excel spreadsheet following a 10-step forecasting template. The
forecasting table should include your specific forecasts for the next five years and should be
included as an appendix in the report.
Explain the reasons for your initial forecast assumptions, i.e. assumptions for sales growth, ATO,
PM, net dividend payout ratio, cost of debt and cost of equity.
Valuation: (allocated 4 marks)
Provide the calculation and results of four valuation models in a table and include it as an appendix
in the report.
Compare and discuss the estimates obtained from the four models. Compare the estimates with
the actual share price to see whether the firm is currently overvalued or undervalued.
Sensitivity Analysis: (allocated 6 marks)
Adjust your initial forecast assumptions to reflect your optimistic and pessimistic outcomes for sales
growth, ATO, PM, net dividend payout ratio, cost of debt and cost of equity and recalculate the
estimated share value from the residual operating income model. Provide the sensitivity analysis
results in a table.
Provide explanations of how the optimistic and pessimistic outcomes for forecasting assumptions
are chosen.
Identify and discuss the key assumptions that the valuation is most sensitive to.
Management Consulting Advice: (allocated 8 marks)
Based on sensitivity analysis and the key factors that have significant impact on valuation, discuss
potential opportunities and challenges for the firm to maintain or improve current profitability.
Provide creative advice on what business strategies and measures specific to your firm that can
be adopted to improve value.
Overall Report Quality: The report should be readily comprehensible, condensed and within the
word limit. Information should be collected from various reliable sources to inform analysis and
references are properly cited. Tables and graphs should be used to effectively present information.
(allocated 2 marks)
Length: Individual Assignment Part A: 2000 words (exclusive of references and appendices). +/- 10% is
acceptable. Appendices are limited to a maximum of 5 pages. Please use a font size of 11, 2.5 cm
page margins and a line spacing of 1.5.
Individual Assignment Part B: 5000 words (exclusive of references and appendices). +/- 10% is
acceptable. Appendices are limited to a maximum of 10 pages. Please use a font size of 11, 2.5 cm
page margins and a line spacing of 1.5.
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Due: Individual Assignment Part A is due on Monday 18 Sep 5pm. Individual Assignment Part B is due on
Monday 16 Oct 5pm.
Assessment task 3: Final Examination (Individual)
Objective(s): This addresses subject learning objective(s):
1, 2 and 3
Weight: 40%
Task: This exam, consisting of practical and theory questions, will test students understanding of the theory
and ability to apply the theory to business valuation and financial analysis. Specifically, the exam
tests students’ comprehensive understanding and ability to perform macro-economic, industry,
strategy and accounting analyses; ability to reformat financial statements and implement ratio
analysis; theoretical comprehension of the different valuation models and ability to apply them in
practical scenarios; theoretical and practical understanding of CAPM and WACC.
The exam covers all teaching contents from week 1 to week 12, and will be similar in spirit to the
problems and cases discussed during the semester.
Length: 2 hour plus 10 minutes reading time.
Further
information:
This is a close-book exam. No text books or other materials will be allowed in the exam. No formula
sheet or calculation template will be provided in the exam.
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Use of plagiarism detection software
All student assignments will be examined by plagirism detection software. Please refer to 'Statement of Plagiarism'.
Students who condone plagiarism by allowing their work to be copied will also be subject to severe
disciplinary action. Avoiding plagiarism is one of the main reasons why the Faculty of Business is insistent
on the thorough and appropriate referencing of all written work.
Supplementary assessments
A student with a disability or special needs may be permitted to undertake particular learning and assessment
arrangements as specified in Rule 8.2.2 and 8.2.3 in order to ensure that the assessment is on the basis of academic
merit and has parity with the assessment of other students. For other special considerations cases, students will need
to provide relevant documentary evidence in support of the request made under Rules 8.3.1, 8.3.2 and 8.3.3.
Medical or other professional certificates alone do not constitute adequate supporting evidence for such requests.
Medical or other professional evidence must be provided by the relevant authority on the relevant official University
request form as prescribed by the Registrar.
Minimum requirements
Students must achieve at least 50% of the subject’s total marks.
Required texts
Palepu, K, Healy, P and Bernard, V, Business Analysis & Valuation using Financial Statements: Text & Cases, Second
Asia-Pacific Edition.
Faculty of Business: Guide to Writing Assignments, Faculty of Business, University of Technology, Sydney (accessed
via the link below) Guide to Writing Assignments
Recommended texts
Penman, S (Fourth Edition) Financial Statement Analysis and Security Valuation, McGraw Hill, New York.
References
The following text provides some extension to the main text: Palepu, K, Healy, P and Bernard, V (2008) Business
Analysis and Valuation using Financial Statements: Text and Cases, 4th edn, Southwestern, Canada.
Academic liaison officer
Dr Peter Lam, Accounting Discipline Group, telephone 9514 3926
Mr Harry Tse, Economics Discipline Group, telephone 9514 7786 or 9514 5456
Associate Professor Jianxin Wang, Finance Discipline Group, telephone 9514 9744
Dr Paul Wang, Marketing Discipline Group, telephone 9514 3692
Associate Professor Carmel Foley, Management Discipline Group, telephone 9514 5102
Any arrangements should be negotiated within the first six weeks of session.
Support
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telephone +61 2 9514 1177 (City campus).
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medical condition that requires support services you are encouraged to contact the accessibility consultants or
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seeking assessment adjustments from your ALO is required.
Improve your academic and English language skills: Marks for all assessment tasks such as assignments and
examinations are given not only for what you write but also for how you write. If you would like the opportunity to
improve your academic and English language skills, make an appointment with the HELPS (Higher Education
Language and Presentation Support) service in Student Services.
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Language and Presentation Support) service in Student Services.
HELPS (Higher Education Language and Presentation Support): HELPS provides assistance with English
language proficiency and academic language. Students who need to develop their written and/or spoken English
should make use of the free services offered by HELPS, including academic language workshops, vacation intensive
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Services, Building 1 Level 5 Room 25 (CB01.05.25).
Study skills / learning support: If you are experiencing difficulty with your studies or need to develop the necessary
study skills you require for your course, there is a host of useful information and websites to help you on the UTS
Business School, Study and Assessment Resource website. Links on how to write better, study more effectively,
available support services/staff to help, how to complete assignments; as well as tips for successful study and online
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treatment to students whose performance in an assessment item is affected by illness, misadventure or work-related
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consideration is not automatically guaranteed and may not result in a mark adjustment
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The policy should be read in conjunction with the Procedures for the Assessment of Coursework Subjects.
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Australian copyright law allows you as a student or researcher to copy and use limited amounts of other people's
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This applies to any sort of published or unpublished work, and includes written material, tables and compilations,
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Statement on plagiarism
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Statement on plagiarism
At UTS, plagiarism is defined in rule 16.2.1(4) as: 'taking and using someone else's ideas or manner of expressing
them and passing them off as his or her own by failing to give appropriate acknowledgement of the source to seek to
gain an advantage by unfair means'.
The definition infers that if a source is appropriately referenced, the student's work will meet the required academic
standard.
Plagiarism is a literary or an intellectual theft and is unacceptable both academically and professionally. It can take a
number of forms including but not limited to:
copying any section, no matter how brief, from a book, journal, article or other written source without duly
acknowledging the source
copying any map, diagram or table of figures without duly acknowledging the source
paraphrasing or otherwise using the ideas of another author without duly acknowledging the source.
Other breaches of academic integrity that constitute cheating include but are not limited to:
copying from another student, recycling another student's work, recycling previously submitted work, and working
with another student in the same cohort in a manner that exceeds the boundaries of legitimate cooperation
purchasing an assignment from a website and submitting it as original work
a student requesting or paying someone else to write original work for them, such as an assignment, essay or
computer program, and submitting it as their own work.
Students who condone plagiarism and other breaches of academic integrity by allowing their work to be copied are
also subjected to severe disciplinary action.
Where proven, plagiarism and other breaches of academic integrity are penalised in accordance with UTS Student
Rules Section 16 – Student misconduct and appeals.
Avoiding plagiarism is one of the main reasons why the UTS Business School is insistent on the thorough and
appropriate referencing of all written work. Students may seek assistance regarding appropriate referencing through
UTS: HELPS.
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Assessment Assessment task 1: Assignment (Group)
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Individual Assignment Part A Name Institution   Individual Assignment Part A The stability, as well as health of any business entity, is particularly verified by various financial and non-financial metrics that measure different aspects of the business (Barnes, 1987). As such, this paper seeks to evaluate the financial standing of Cleanaway Waste Management Limited, a firm listed on the Australian Stock Exchange, with a view of determining the business’ performance over the past five years (2012-2016). As such, the paper ...
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