Master of Finance
The University of Hong Kong
Financial Statement Analysis and Business Ethical Standards
1 Sep, 2008 to 9 Nov, 2008
INSTRUCTOR: HAN Jun
Assistant Professor in Accounting
School of Business
The University of Hong Kong
Pokfulam Road, Hong Kong
Shenzhen Business School
Peking University

COURSE OBJECTIVE
This course provides an introduction to the fundamental concepts and techniques related
to financial statements analysis. After this course, you are expected to be able to:
1. Identify useful financial information and correctly interpret the information;
2. Get a comprehensive understanding of how accounting information is prepared
and disclosed and accounting rules governing the production and disclosure of the
information;
3. How to read and interpret financial statements and the interrelationships of the
line items of the financial statements;
4. Make necessary adjustments to make the accounting information better reflect the
firm’s economic performance, and to enhance the time-series and cross-sectional
comparability of financial statements;
5. Understand the role of financial statement analysis in evaluating the historical
performance of firms, in predicting the future performance of firms, and in
valuating firms;
6. Being equipped with professional ethical standards.
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TEXTBOOKS
1. White, G.I., Sondhi, A.C., and Fried, D., The Analysis and Use of Financial
Statements, (3rd Edition), 2003, John Wiley & Sons, Inc. (WSF)
2. Associate for Investment Management and Research (AIMR), Standards of Practice
Handbook, (8th Edition), 1999.
3. J.R. Williams, S.F. Haka, M.S. Bettner, J.V. Carcello, Financial Accounting, 13th edition,
2008, McGraw-Hill International Edition.
COURSE EVALUATION
The assessment is based on assignments, group project and final exam. The weights of
the various components in determining the final grade are:
Assignments 10%
Group Project 35%
Final Exam 55%
Total 100%
Assignments
Assignments are evaluated on an individual basis. In total five assignments are expected
to be completed and evaluated. After each lecture, the assignments relevant to that week
will be assigned. Answers are expected to be handed in to your TA before the tutorial
class starts. Any assignments after the tutorial session are NOT counted. Your TA will
mark them and keep a record. Your TA will review selected assignments for that week in
the tutorial sessions.
Group Project
Group project is evaluated on a group basis. Students will be formed into teams of five.
Your TA is responsible for forming groups. Your project should demonstrate evidence of
detailed analysis of financial statement data and evidence of integrating the tools and
concepts covered in the course.
Project Content
Write a mock analyst’s research report for one of the following companies:
? Google Inc.
? Apple Inc.
? Amazon.com
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Suggested Information Sources
? The firm’s recent financial statements
? The company’s website
? News releases about the firm, e.g., Wall Street Journals, yahoo finance
? Newswire databases, e.g., Lexis/Nexis, proquest, Factiva
? Government reports, economic data, financial market data, and more
Written Report
Each group should submit a mock analyst’s report for the selected company. An example
of analyst’s report for Lenovo group is provided for your reference.
Essentially, your report should contain the following key information:
? Recommendation: strong buy / buy / hold / sell / strong sell;
? 12-month Target Price;
? An executive summary on the first page, talking about your key and interesting
findings;
? Investment rationale: which valuation models you use in order to deduct the target
price. For better justification, you are advised to use more than one valuation
models in order to triangulate your conclusions;
? Risks: what is the risk involved for investing the company (this part is based on
Chapter 18 which we may not cover, therefore it is optional);
? Key Financial Data: your adjusted financial data for the past two years, as well as
forecasted financial data for the coming two years. You may choose which set of
financial data you would like to present. Please use an appendix to briefly explain
how you did the necessary financial statement adjustments and get the final
adjusted numbers, also what is the rationale for the forecasted financial data.
? Other useful information (including charts and tables) which you think supports
your conclusion.
Please note:
? The written report must not contain work copied from other students/teams;
? The written report must not plagiarise material from any sources.
? Any reports with plagiarism are marked zero!
? To address “free riding” concerns, each group member has to agree how much
percentage of the group work that other members contribute. The individual
marks on the project will be based on the percentage adjustment of the group
mark. The group member’s name and contributed percentage should be stated on
the first page of the report.
The deadline for submitting the report is 9 Nov, 2008. You should email me the PDF
version of your report. You should not assume that I have received your report
unless you get my email confirmation.
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Final Exam
The final exam will be closed-book and comprehensive of all course topics and materials.
No make-up exam will be given except for medical or other emergency reasons
supported by proper documentation. More information will be provided later.
LECTURE AND TUTORIAL ARRANGEMENTS
Lectures Tutorials
Week 1 (starting 1 Sep) 5 Sep 2pm to 5pm
6 Sep 930am to 1230pm
Week 2 (starting 8 Sep) 12 Sep 2pm to 5pm
13 Sep 930am to 1230pm
12 Sep 21:40 to 22:40
Week 3 (starting 15 Sep) 19 Sep 2pm to 5pm
20 Sep 930am to 1230pm
19 Sep 21:40 to 22:40
Week 4 (starting 22 Sep) Break Break
Week 5 (starting 6 Oct) 10 Oct 2pm to 5pm
11 Oct 930am to 1230pm
10 Oct 21:40 to 22:40
Week 6 (starting 13 Oct) 17 Oct 2pm to 5pm
18 Oct 930am to 1230pm
17 Oct 21:40 to 22:40
Week 7 (starting 20 Oct) To be confirmed 24 Oct 21:40 to 22:40
Week 8 (starting 27 Oct) Break Break
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COURSE SCHEDULE
Part One: Overview (Week 1& 2)
? Financial Reporting Framework (WSF Chapter 1)
? Principal Financial Statements (WSF Chapter 2 & 3)
? Ratio Analysis (WSF Chapter 4)
Part Two: Analysis of Assets (Week 3)
? Analysis of Inventories (WSF Chapter 6)
? Analysis of Long-Lived Assets (WSF Chapter 7 & 8)
Part Three: Analysis of Liabilities and Equities (Week 3 & 5)
? Analysis of Income Tax Liabilities (WSF Chapter 9)
? Analysis of On-Balance-Sheet Finance Liabilities (WSF Chapter 10)
? Analysis of Leases and other Off-Balance-Sheet Liabilities (WSF Chapter 11)
? Analysis of Derivatives and Hedging Activities (WSF Chapter 16)
Part Four: Other Topics (Week 6 & 7)
? Intercorporate Investments (WSF Chapter 13)
? Business Combinations (WSF Chapter 14)
Part Five: Synthetic Analysis & Valuation Models (Week 7)
? Synthetic analysis (WSF Chapter 17)
? Valuation models (WSF Chapter 19)