General Information
Instructor(s)
- Consulting (r)
- Financial Reporting and Analysis (c)
- Investment Banking (r)
- Management Analytics (r)
Target Audience
This course is targeted towards students pursuing a career where one needs to analyze financial statements “intelligently.” This obviously includes those interested in finance related professions such as Investment Banking, The course will consist of five modules. The first module (industry and strategic analysis) will illustrate why the critical first step is to understand industry structure and a company’s strategic choices. The second module (accounting analysis) will provide a framework to understand and evaluate a firm’s accounting and disclosure choices, and provide techniques to adjust financial statements to ensure better comparability. The third module (financial analysis) will present a comprehensive framework for ratio analysis where a firm’s operations are separated from its financing to better understand the true drivers of profitability and risk. The fourth module (prospective analysis) will present techniques for integrated forecasting, and will apply the insights from the earlier modules to generate forecasts for the firm. These forecasts will be used to value firms using a variety of techniques including multiples and abnormal earnings-based valuation methods. In the fifth module, the techniques learned in the prior modules will be applied in a variety of settings including credit analysis and mergers and acquisitions.
Course Mission
This course will help you analyze and value businesses using financial statements. We will discuss how accounting regulations and managerial discretion influence financial statements. You will also learn how to interpret financial statements, analyze cash flows, and make judgments about earnings quality. Finally, we will use financial statement analysis prospectively to forecast and value firms using cash flow-based and accounting-based methods.
Course Scope
The course will consist of the following five modules. In the first module (strategic and industry analysis) you will learn why the critical first step is to understand industry structure and a company’s strategic choices. The second module (accounting analysis) will provide you with a framework to understand and evaluate a firm’s accounting and disclosure choices and learn how to adjust financial statements to ensure better comparability. The third module (financial analysis) will present a comprehensive framework for ratio analysis where a firm’s operations are separated from its financing to better understand the true drivers of profitability and risk. The fourth module (prospective analysis) will expose you to techniques of integrated forecasting, where you will apply the insights from the earlier modules and apply them to truly understand what the future holds for the firm being analyzed. You will then use these forecasts to value firms using a variety of techniques including multiples and abnormal earnings based valuation methods. In the fifth module, you will apply the business valuation techniques in a variety of settings including credit analysis and M&A.
Evaluation and Grade Distribution
| Component | Due Date | Weight |
|---|---|---|
| Group Project | During course term | 30% |
| Class Participation | Ongoing | 10% |
| Quizzes | Ongoing | 30% |
| Final Paper | Within one week after the end of the course (check course page/schedule) | 30% |
Required Resources
AVAILABLE on Course Webpage: workbooks for class, Excel spreadsheets, links to relevant articles from business press, and additional readings.
REQUIRED BOOK: Financial Statement Analysis & Valuation, 6th edition, by Easton, McAnally, and Sommers. Published by Cambridge Business Publishers, 2021.
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