BUS4072 develops students' ability to extract actionable insights from financial statement data — moving beyond accounting compliance to financial analysis and business valuation. Building on the foundation of BUS4070 (Foundations in Finance), students learn to use income statements, balance sheets, and cash flow statements as analytical tools for evaluating business performance, identifying financial strengths and weaknesses, and estimating the intrinsic value of business enterprises.
Financial statement analysis and business valuation
Core topics
- Financial statement analysis: Ratio analysis across the five key categories — liquidity (can the firm meet short-term obligations?), efficiency (how effectively are assets used?), leverage (how is debt managed?), profitability (what returns are generated?), and market (how does the market value the firm?) — and trend analysis across time periods
- Common-size analysis: Expressing income statement items as percentages of revenue and balance sheet items as percentages of total assets to enable meaningful comparison across firms of different sizes and across time periods
- Cash flow analysis: Interpreting the cash flow statement — operating, investing, and financing activities — to assess earnings quality, capital allocation decisions, and the firm's ability to generate sustainable free cash flow
- Business valuation: Applying discounted cash flow (DCF) valuation, comparable company analysis (trading multiples), and precedent transactions analysis to estimate the fair value of business enterprises and equity interests
- Financial decisions: Using financial statement analysis as input for capital structure decisions, dividend policy, working capital management, and strategic assessments of acquisition targets or divestiture candidates
BUS4072 assignments include financial ratio analyses, company valuation projects, and financial decision case studies
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Frequently asked questions
Profitability ratios show whether a firm is earning money, but they tell only part of the story. A highly profitable firm can still fail if it runs out of cash (liquidity crisis), carries too much debt (leverage risk), or is inefficient in turning assets into revenue (efficiency problems). Financial statement analysis gives a multidimensional picture: a company with improving profit margins but deteriorating receivables turnover and rising days-sales-outstanding may be booking revenues it cannot collect. BUS4072 trains students to read these signals together — using the income statement, balance sheet, and cash flow statement as an integrated analytical system — so they can identify both strengths and early warning signs in a business's financial health.