This subject introduces the student to the role of accounting numbers in understanding the valuation of businesses, in addition to specific applications such as security analysis, credit analysis, financial policy analysis, the evaluation of takeovers and initial public offerings and other context-specific settings in which accounting data plays a central role. Four key generic skills are highlighted as a precursor to undertaking context-specific financial analysis and valuation: business analysis; accounting analysis; financial analysis, and prospective analysis. Students first learn the importance of each of these steps, and then how to apply them in context-specific settings. The subject also highlights the use of accounting numbers via the residual income approach to valuation. This is closely aligned with systems such as Economic Value Added or Economic Profits, as promulgated in early accounting literatures and currently by major consulting firms.

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