This course is intended to develop skills for the strategic analysis of financial reporting, and to develop experience in evaluating financial performance as well as the risk of default. A company’s financial reports convey a wealth of useful information about its business. Financial reports are the primary means by which managers communicate company results to investors, creditors and analysts. These parties use the reports to judge company performance, to assess creditworthiness, to predict future financial performance, and to analyze possible acquisitions and take-overs. Users of financial statements must be able to meaningfully interpret financial reports, construct measures of financial performance.
To enable meaningful comparison across business, accounting regulators have developed a set of standards and rules that provide guidelines to the reporting firms. Nevertheless, these standards and rules still allow mangers considerable discretion in reporting the firm’s results. Since company managers choose among a set of available accounting procedures when preparing their reports, we need to learn about accounting choices in order to achieve a thorough understanding of the reports and their link to the underlying business activity and economic reality.