THE UNIVERSITY OF HONG KONG

HKU BUSINESS SCHOOL

Master of Finance Program

Course Syllabus and Outline for Module 2 of 2022-2023

For MFIN7001ABCDE: Financial Statement Analysis and Business Ethical Standards

I. INFORMATION ON INSTRUCTOR

Instructor: Dr. Derek K. Chan

Office: KKL 1203
Office Tel: 3917-8357
E-mail: [email protected]
Office Hours: 2:00 pm to 5:00 pm, Wednesday or by appointment

II. COURSE INFORMATION

(i) Course Descriptions: This course provides an introduction to the financial statements
and financial reporting process from a user’s perspective. The course focuses on
fundamental accounting concepts and principles as well as techniques related to financial
statements analysis. Ethical and professional standards that persons engaged in the
professional practice of financial analysis and investment management should know,
understand, and apply are also covered.

(ii) Required Textbook: There is no required textbook, but students would find the
following references useful.

1. White, G.I., Sondhi, A.C., and Fried, D., The Analysis and Use of Financial
Statements, (the latest edition), John Wiley & Sons, Inc.
2. Associate for Investment Management and Research (AIMR), Standards of Practice
Handbook, (the latest edition).
Available at: http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2010.n2.1

Students might also consider having a copy of the Schwester Study Notes for the CFA
Exam: Financial Statement Analysis and Ethical and Professional Standards.

(iii) Lecture Notes: Lecture notes are available on the course Moodle.

(iv) Course Learning Outcomes (CLOs): On completion of this course, you should be able
to:
CLO1. Learn the concepts and theories of financial accounting, and how economic
activity is measured and reported.
CLO2. Assess the effects of alternative accounting policies on financial statements.
CLO3. Apply relevant accounting information in making business decisions such as
credit, investment, performance evaluation, etc.
CLO4. Develop skills in analyzing financial accounting cases and writing financial
statement analysis projects as well as team working skill.
CLO5. Inculcate professionalism.

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(v) Alignments of Program and Course Learning Outcomes

Program Learning Outcomes (PLOs) CLOs

1. Acquisition of techniques and advanced knowledge in
interdisciplinary fields between finance and other appropriate
disciplines including but not limited to engineering, law and
mathematics
2. Application and integration of knowledge and skills in finance and CLOs 1, 2, 3 and 4
relevant interdisciplinary fields to identify and tackle practical
problems, and design innovative products and systems with
international standards and global vision
3. Inculcating leadership, professional ethics and competence in finance CLOs 3, 4 and 5
and relevant interdisciplinary fields
4. Mastering communication skills CLO 5

(vi) Teaching and Learning Activities (TLAs)

TLA1. Situation: Interactive Lectures

 Lecture on major concepts and issues: Interactive lectures with PowerPoint slides are
conducted with the lecturer explaining and illustrating the financial accounting concepts
and practice. Students will be invited to share their views in applying the concepts.
Major focus: CLOs 1, 2, and 3

TLA2. Situation: In-Class Exercises

 Basic financial accounting concepts and techniques are illustrated using examples. Students
work along with the lecturer to solve the problems. These exercises help students follow the
lectures closely and actively.
Major focus: CLOs 1 and 2

TLA3. Situation: In-Class Case Discussion

 Short cases involving financial statements will be used in class and are designed to
emphasize accounting concepts and methods and to explore disclosure strategies as part of
the financial reporting process. These discussions encourage students to think more for
certain arguable topics.
Major focus: CLOs 2, 3 and 4

TLA4. Situation: Group Written Financial Statement Analysis Project

 The group project will be performed in teams of eight students from the same session.
The objective of the group project is to give you an opportunity to study in depth one firm.
Your project should demonstrate evidence of detailed analysis of financial statement data
and evidence of integrating the tools and concepts covered in the course. You are required
to prepare a report (maximum 10 pages + supporting exhibits + one-page executive
summary) that summarizes the results of your financial analysis, using one-inch margins, a
reasonable font size, and double spacing. In addition, please make appropriate references to
the source material and submit copies of any unique source material you use.
 Your group should submit a project proposal by the third week of the module. In your
proposal, please (1) describe the firm; (2) explain why you find the selected company/topic
interesting; and (3) state the names, phone numbers, and email addresses of all group

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 members as well as nominate a leader who will be responsible for notifying me of the work
progress and consult me on problems faced by the group.
 Each team member is expected to make sincere contribution to the group. To avoid having
free-riders in your group, a peer-evaluation may be conducted at the end, so that you will have
a chance to evaluate each of your group members’ performance and contribution to the group.
Ratings of you and comments from your peers will be taken into account when determining
your final grade in your group work. You should provide the most candid evaluation of each
of your group members. The evaluation will be submitted to me directly and will be kept
confidential.
 The final report is due by 11:59 pm on December 4, 2022. You must submit your final
report (in WORD or PDF format) to me by email.
 Here is the suggested approach for your project. Select a firm in which you have a
particular interest. (I recommend that you avoid analyzing a bank, insurance company, or
any other type of financial institution. I suggest you pick a company that has at least 3 years
of historical financial statements.) Analyze this firm’s performance relative to its past
performance and relative to the performance of other firms in the same industry. After you
have done some preliminary analysis, settle on a “theme” or “thesis” for your project. Ask
yourself, what is the “story” for this firm? If Business Week and Wall Street Journal did a
feature article on this firm, how would the headline read? Try to formulate your thesis
concisely and marshal your facts in support of this thesis. The types of questions you might
wish to address include the following:
 How does a company’s recent performance compare to that of its major competitors,
taking into account any accounting differences across firms? What are its prospects?
Can you recommend changes management can make that would improve future
performance? Has the company made unwise investments in other companies? Is it in
financial distress or subject to strong competitive pressures to restructure? For companies
in financial distress, you should document the symptoms of such distress and comment
on the firm’s ability to survive. Recommend a course of action for management,
directors, and/or investors to pursue.
 What’s the secret at Company X? In an industry swamped by red ink, how did this
company stay profitable? Is it clear sky for this high flier, or are there clouds on the
horizon? Alternatively, pick a loser in an industry, find out what went wrong, and discuss
ways to fix it.
Major focus: CLOs 3 and 4

Assessment Tasks/Activities (ATs)

Group Work: (30%)

AT1. Written Financial Statement Analysis Project 30%
Individual Work: (70%)
AT2. Class Attendance and Participation 10%
AT3. Comprehensive Final Exam 60%
TOTAL 100%

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AT1. Group Written Financial Statement Analysis Project (30%)
Your project will be graded on the following criteria: Explanation of Analysis (40%);
Identification of Relevant Data (40%); and Writing Style (20%).

Grading Criteria
CLO A+ A A- B+ B B- C+ C C- D+ D F
CLOs Very good to Good to very Fair to good Fair ratings on Fail to prepare
3 and excellent good ratings ratings on some all three the project.
4 ratings on on some or all or all three criteria.
some or all three criteria. criteria.
three criteria.

AT2. Class Attendance and Participation (10%):

Attendance will be taken for lectures. The attendance and individual sharing in class will be
considered in assigning points for attendance and individual participation. Students should also
prepare to be called upon for input to solving problems in class.

Grading Criteria
CLO A+ A A- B+ B B- C+ C C- D+ D F
CLOs Extremely well Well prepared Partially Not well Never prepared
1, 2, prepared for for class prepared for prepared for for class
3, 4 class discussion, class discussion, class discussion and
and 5 discussion, quite active in limited active in discussion, no no sharing of
active in sharing views sharing views sharing of views and
sharing views and attend at and attend at views and attend less than
and attend at least 80% of least 80% of attend at least 70% of classes.
least 90% of classes. classes. 70% of classes.
classes.

AT3. Comprehensive Final Examination (60%)

The final exam will be held on Saturday, December 3, 2022, from 1:30 pm to 3:30 pm (room to
be confirmed). 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. You must have your student photo-ID to take an exam. All
calculators brought into the exam room may not have any information stored in memories and
covers must be removed.

Grading Criteria
CLO A+ A A- B+ B B- C+ C C- D+ D F
CLOs Score correctly Score correctly Score correctly Score correctly Score correctly
1, 2, on more than on less than on less than on less than on less than
and 3 85% of the 85% of the 70% of the 60% of the 50% of the
questions questions questions questions questions

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Teaching and Learning Activities, Assessment Tasks and Alignment with Course Learning
Outcomes

CLO Teaching and Learning Assessment Tasks (AT)

Activities (TLA)
1 2 3 4 Self Study Total 1 2 3
1 ✓ ✓ ✓ ✓
2 ✓ ✓ ✓ ✓ ✓
3 ✓ ✓ ✓ ✓ ✓ ✓
4 ✓ ✓ ✓ ✓
5 ✓ ✓ ✓ ✓ ✓
Expected 36 24 60 120
Contact
Hour
Study 30% 20% 50% 100%
Load (%
of Study)

III. COURSE POLICIES

Academic Dishonesty
The University Regulations on academic dishonesty will be strictly enforced. Please check the
University Statement on plagiarism on the web: http://www.hku.hk/plagiarism/

Academic dishonesty is behavior in which a deliberately fraudulent misrepresentation is

employed in an attempt to gain undeserved intellectual credit, either for oneself or for another.
It includes, but is not necessarily limited to, the following types of cases:

 Plagiarism – The representation of someone else’s ideas as if they are one’s own. Where the
arguments, data, designs, etc., of someone else are being used in a paper, report, oral
presentation, or similar academic project, this fact must be made explicitly clear by citing the
appropriate references. The references must fully indicate the extent to which any parts of
the project are not one’s own work. Paraphrasing of someone else’s ideas is still using
someone else’s ideas, and must be acknowledged.
 Cheating on Exams – The covert gathering of information from other students, the use of
unauthorized notes, unauthorized aids, etc.

If you are caught in an act of academic dishonesty or misconduct, you will receive an ‘F’
grade for the subject. If your group project submitted has been discovered to be an exact
copy of someone else’s work, all students involved will be subject to the penalty for the act of
plagiarizing or copying.

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Class Schedule (Any revision of this class schedule will be announced in class)
Session A: Mon & Thu 9:30 – 12:30
Session B: Mon & Thu 14:00 – 17:00
Session C: Tue & Fri 9:30 – 12:30
Session D: Tue & Fri 14:00 – 17:00
Session E: Wed & Sat 9:30 – 12:30 (Online Session)

Lecture 1 Introduction to Financial Accounting

Oct 17/18/19 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapter 1
Lecture 2 Principal Financial Statements – Balance Sheet
Oct 20/21/23 (Thu/Fri/Sat) Reading: White, Sondhi & Fried Chapters 1 & 2
Lecture 3 Principal Financial Statements – Income Statement
Oct 24/25/26 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapter 2
Lecture 4 Principal Financial Statements – Statement of Cash Flows
Oct 27/28/29* (Thu/Fri/Sat) Reading: White, Sondhi & Fried Chapter 3
Lecture 5 Analysis of Sales Revenue
Oct 31/Nov 1/2 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapter 2
Lecture 6 Analysis of Assets
Nov 3/4/5 (Thu/Fri/Sat) Reading: White, Sondhi & Fried Chapters 6, 7 & 8
Project proposal due
Lecture 7 Analysis of Assets (Continued)
Nov 7/8/9 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapters 6, 7 & 8
Lecture 8 Analysis of Liabilities
Nov 10/11/12 (Thu/Fri/Sat) Reading: White, Sondhi & Fried Chapters 9, 10 &11
Lecture 9 Analysis of Liabilities (Continued)
Nov 14/15/16 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapters 9, 10 &11
Lecture 10 Analysis of Intercorporate Investments
Nov 17/18/19 (Thu/Fri/Sat) Reading: White, Sondhi & Fried Chapters 13 & 14
Lecture 11 Doing Financial Statement Analysis
Nov 21/22/23 (Mon/Tue/Wed) Reading: White, Sondhi & Fried Chapters 4 & 17
Lecture 12 Standards of Professional Conduct
Nov 24/25/26 (Thu/Fri/Sat) Reading: Standards of Practice Handbook

* Class on October 29 (Sat) will be changed to 14:00 - 17:00

Attendance
To ensure that students gain the maximum benefit from classes, students are required to attend at
least 70% of classes for each course; otherwise they may be treated as having failed the whole
course. Only except unexpected events, should students find themselves unable to attend a class,
they have to inform the teacher concerned or the staff beforehand in writing, for example, by fax
or by e-mail. Coming late to class is also not encouraged. If students are 30 minutes late, they
will be regarded as not having attended the class.