General Information
Instructor(s)
- Consulting (r)
- Financial Reporting and Analysis (c)
- Investment Banking (r)
- Management Analytics (r)
Course Description
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 |
|---|---|---|
| Class Participation | Ongoing | 20% |
| Group Project Part 1 | July 30, 2022 @ 11:59 pm | 20% |
| Group Project Part 2 | August 7, 2022 @ 11:59 pm | 20% |
| Final Exam | August 9, 2022 @ 5:00 pm | 40% |
Required Resources
All the course documents (e.g., presentations for class, Excel spreadsheets, links to articles from the business press, additional readings, etc.) will be available on Quercus. There will be no additional course packet. There is no required or recommended book for the course. If you wish, you may use any financial statement analysis and valuation textbook as a supplementary reference.
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