ACC420E Strategic Financial Statement Analysis

• Topics

  This course provides the key competencies to understand and independently evaluate financial statement information. Are the results satisfying? Has the management performed well and deserves a bonus? Is the company financially constrained? How should an investor read corporate accounts? ACC420E will enable students to answer these questions.

  The course covers five blocks of topics:

  1. Accounting analysis

  • Economic rationale and regulation of financial reporting.
  • A framework for analysis.
  • Areas of accounting flexibility.
  • Normalization of the income statement.
  • Sustainability reporting.

  2. Financial analysis

  • Performance appraisal.
  • Regrouping of financial statement items.
  • Cash flow analysis.

  3. Prospective analysis

  • Forecasting future earnings and cash flows.

  4. Liquidity and financial stability analysis

  • Credit analysis and distress prediction.

  5. Compensation analysis

  • Management performance and incentive remuneration.

• Learning outcome

  Upon course completion, the student will:

  Knowledge

  • Have substantial knowledge of profitability, growth, and liquidity analyses using financial statements, financial information, and key performance indicators.
  • Be able to identify the most suitable analysis from the perspectives of external capital providers and those who internally decide and monitor investment and financing policies.
  • Understand and independently evaluate managerial discretion in reporting financial information, including its effect on key figures and financial analysis.
  • Understand how to improve the quality of financial information for analysis purposes.
  • Understand the main recent developments in the area of sustainability reporting.

  Skills

  • Be able to apply concepts and principles to conduct relevant analyses of profitability, growth, and liquidity using financial statements.
  • Be able to perform these analyses from the perspectives of different users: an investor, a creditor/bank, and those who internally appraise management performance.
  • Be able to identify critical areas for flexibility, assess the quality of corporate accounts, and make the necessary adjustments so that financial information is better suited for analysis.
  • Understand and independently evaluate the consequences of accounting flexibility for key performance indicators and financial statement analysis.

  General competence

  • Be able to communicate key results and areas for improvement both in writing and orally.
  • Understand the main academic theories and empirical findings related to financial reporting, analysts' forecasts, and distress prediction.

• Teaching

  Lecture are accompanied by weekly seminars. Seminars typically take the form of a discussion of a specific problem set, business case or research article. Preparation for seminars is an essential part of the workload for this course. Students are expected to actively participate to the discussions in the classroom.

• Credit reduction due to overlap

  ACC420E is a continuation of BUS424E.

  ACC420E can not be combined with ACC420N, BUS424E, BUS424N, and BUS424.

• Compulsory Activity

  Group presentation (3-5 students)

  Retake: Previously acquired course approvals are valid. Compulsory activities are valid for all variants of BUS424, independent of suffixes (-E, -A, -N, or similar)

• Assessment

  4 hour digital individual school exam.

  The exam must be answered in English.

• Grading Scale

  A - F

• Literature

  Main textbook:

  • Palepu, Healy, and Peek. 2022. Business Analysis and Valuation: IFRS Edition, Cengage, Sixth Edition. [ISBN: 9781473779075]

  Supplementary reading (eBook available via Leganto/Library):

  • Lev, and Gu. 2016. The End of Accounting and the Path Forward for Investors and Managers, Wiley Finance Series [ISBN: 9781119191087]

• Permitted Support Material

  Calculator

  One bilingual dictionary (Category I)

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support materialhttps://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.nhh.no%2Fen%2Ffor-students%2Fregulations%2F&data=05%7C02%7CKaren.Reed-Larsen%40nhh.no%7Cc32b399193e84f649dfb08dc53bd018d%7C33a15b2f849941998d56f20b5aa91af2%7C0%7C0%7C638477318436926037%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=xZdEwiNEG6UH87YHQ%2B1BxJyqnscoqe50k1rbhgpM%2FJE%3D&reserved=0https://www.nhh.no/en/for-students/regulations/and https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.nhh.no%2Fen%2Ffor-students%2Fexaminations%2Fexamination-support-materials%2F&data=05%7C02%7CKaren.Reed-Larsen%40nhh.no%7Cc32b399193e84f649dfb08dc53bd018d%7C33a15b2f849941998d56f20b5aa91af2%7C0%7C0%7C638477318436936722%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=CtqSyUh2RPloWk0juZUHILvNz8JHqNDnA1KVs60In44%3D&reserved=0https://www.nhh.no/en/for-students/examinations/examination-support-materials/