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The accounting faculty teaches one MBA core course: Financial Accounting, a full-semester course that students take in their first semester. In addition, the accounting division offers a wide variety of elective courses in financial accounting and valuation, managerial accounting, and taxation for students in the MBA and EMBA programs. We also contribute to several highly rated Executive Education programs.
MBA/EMBA Core Courses
The core course, Accounting I: Financial Accounting covers the basic concepts and tools of accounting. Financial Accounting emphasizes the development and use of financial statements (e.g., annual or quarterly reports).
Accounting I - Financial Accounting (B6001)
Designed to develop an understanding of accounting principles for users of accounting information. The course looks at how users of financial information interpret accounting reports when making business decisions. The emphasis is on profitability concepts and performance evaluation. Coverage is not restricted to the existing U.S. model but includes a broad discussion of measurement issues and alternative country practices.
Financial Accounting Electives
Accounting for Value (B8022)
This course is about handling accounting information in value investing. The issue is straightforward: How do I infer value from such numbers as earnings, book value, cash flows, return on equity, and return on assets? What are the pitfalls? When can I be led astray? How do I make valid inferences? “Profitability” is an important valuation attribute, but does reported accounting profitability convey real profitability? If not, how do I handle the deficiency?
The answers to these questions require, first, an understanding of the integrity of the numbers that financial statements report and, second, an understanding of what a “clean” number tells us and what it does not tell us. The first question is the issue of so-called “earnings quality.” While we will be sensitive to the quality of the accounting in this course—and indeed develop some striking criticisms and make adjustments—our focus will largely be on the second, the issue of appreciating the value implications of accounting numbers. (There is a detailed course on earnings quality at Columbia Business School, Earnings Quality and Fundamental Analysis, B8008.)
Accounting numbers, used appropriately, are powerful aids to the value investor in understanding a business and the value in that business. However, they can be easily misused. A P/E ratio, for example, serves as an important input to a value investor, but the investor is in danger of being falsely cued if he or she does not appreciate what that ratio actually captures. A too-simple form of “value investing” trades on P/E and price-to-book (P/B) under the label, “Value versus Growth” investing, but the uninitiated is in danger of falling into the Value Trap. In this course you will understand the Value Trap and how to avoid it. More importantly, you will appreciate how a dedicated approach to value investing deals with accounting numbers to understand when price is different from value. Indeed, the course will show how to bring the appropriate (possibly adjusted) accounting numbers together to challenge the market price and thus avoid the greatest risk in investing, the risk of paying too much.
The course title is that of my book, Accounting for Value. This easy-read develops the themes and the course flushes them out. By the end of the course, you should have the answers to the following questions:
- How do I understand the profitability of a business from the financial statements and what does that imply for the value of the business?
- Apple Inc. trades at a forward P/E of 11.5. What does that tell me? Is the stock cheap or expensive?
- Apple Inc. trades with a PEG ratio of 0.85. Is it cheap?
- The value investor is wary of taking on leverage. How does leverage affect accounting numbers such as earnings and return on equity, and how can those levered numbers lead me astray?
- The value investor is wary of buying growth, for growth is risky. How does the accounting tell me that prospective growth is risky?
- What is the Value Trap? How can I avoid it?
- Which accounting numbers do I have to be wary of?
- How do I use accounting numbers to understand the growth expectations built into the market price?
- How do I challenge the market price using accounting numbers?
Corporate Transactions and Financial Modelling (B8018)
The main objective of “Corporate Transactions and Financial Modelling” is for you to acquire a lasting ability to successfully understand, analyze, model, value and creatively think about LBO, M&A, IPO/SEO and restructuring activities. Towards this end, I will (1) teach you structural, accounting, regulatory, taxation, institutional and process-related aspects of different transaction types, (2) train you in valuation and advanced financial statements analysis and (3) coach you in preparing full-blown operating and financial models using Excel 2010. We use these models to (e)value(ate) transactions and to explore the impact of different deal structures, accounting choices, operating assumptions and financing decisions, e.g. on firm value, liquidity, profitability, returns, and other financial statement ratios.
The course draws on basic valuation concepts and financial statement analysis skills taught in your core classes. We advance them in various ways. First, we integrate institutional and process-related details into our study of corporate transactions. Second, we extend your accounting, taxation, valuation and regulatory knowledge to equip you for deal-specific analysis. Third, using Excel 2010 we develop full-blown M&A, LBO and bankruptcy models (with integrated B/S, I/S and CFS) to study the impact of different financing and transaction structures on the feasibility of deals.
Throughout the course, we use databases that are commonly used by practitioners and place special emphasis on real-world applications. For example, I provide you with your own FactSet Desktop license including Excel add-in and incorporate FactSet applications into the course. The course’s overarching goal is for you to obtain an advanced toolbox that helps to succeed in a position in IB, PE, consulting, investment management, corporate management or an entrepreneurial role that requires corporate transaction skills and knowledge.
For more information about this class, feel free to contact Anne Heinrichs at firstname.lastname@example.org.
Earnings Quality and Fundamental Analysis (B8008)
Financial reporting provides a window into the operational and financial workings of a company. However, translating this information into actionable insights is anything but straightforward. It requires an understanding of Generally Accepted Accounting Principles (GAAP), the quality of financial information, and the adjustments and analyses required to accurately measure and evaluate firm performance, risk, growth prospects, and value. This course is devoted to a systematic study of these topics, often in industry-specific contexts. We will discuss key GAAP in detail, and analyze many actual financial disclosures and accounting abuses. We will also cover standard and not-so-standard financial analysis techniques, and incorporate insights from practitioner and academic research. The primary objective is to acquire a deep understanding of accounting information and how to intelligently use it in making investment and related decisions. Such knowledge is required of executives, bankers, analysts, investment managers, and other sophisticated users of financial information.
Economics of Strategic Behavior (B7216-001)
This course is designed to reinforce and develop student abilities to apply the concepts of industry analysis and game theory that were introduced in the core course in Business Economics (B6005). The vehicle for doing this will be predominantly case analyses since the ability to use the course concepts effectively will come largely from repeated application of those concepts.
The topics covered will be (1) the dynamics of entry and the impact of global competition, (2) the strategic imperatives of competitive markets, (3) sources of competitive advantage (local and global), (4) managing competitive interactions (cooperation and preemption), (5) bargaining situations, (6) the impact of information distribution and (7) financial implications of strategic economics. The course will consist of approximately one-third lectures and two-thirds cases. The emphasis in the course is on the ability to apply a small number of principles effectively and creatively, not the mastery of detailed aspects of the theory. For this reason the case discussion classes are particularly important.
Financial Statement Analysis and Valuation (B8009)
This course helps students understand how firms communicate through financial statements. They learn how to:
- use financial statement analysis as an integral part of the strategic analysis of firms;
- interpret financial statements, make judgments about earnings quality, and uncover hidden assets and liabilities;
- apply financial statement analysis prospectively to forecast and value firms by applying modern accounting-based technologies.
The course has a very practical emphasis, with a wide variety of cases, in-class exercises, and a group project, all involving comprehensive analyses of publicly traded companies.
Financial Planning and Analysis (B8007)
This course introduces students to modern tools and techniques designed to generate performance measures used for decision-making, management, and control purposes. Accounting information is used for a variety of managerial decisions such as product pricing, profitability analysis (e.g., activity-based costing for customer lifetime value). This course further illustrates how performance measures are integrated into incentive systems so as to align the objectives of (division) managers with those of the shareholders. Key building blocks of such incentive systems are cost allocations, transfer pricing, and compensation schemes. At a time where performance measurement is one of the fastest-growth areas for consulting firms, this course illustrates the strengths and weaknesses of commonly-used performance metrics, e.g., Economic Value Added (EVA), Balanced Scorecard. It serves as an important background for a variety of electives in management and accounting as well as for consulting-related courses.
Fundamental Analysis of Investment and Management Decisions: A Practical Guide (B8010)
Most business decisions of investors, analysts, consultants and managers require us to assess the future. You will learn a different approach to make better decisions using the fundamentals of businesses. Students who have taken this course often comment on how it transforms their thinking and analysis. It also is a useful “capstone” to an MBA.
We consider how to use financial reports and to supplement the accounting information to understand the company.
It will cover some topics/concepts that are in financial statement analysis, earnings quality, security analysis and valuation classes. But I have never received feedback that the coverage in this course is redundant irrespective of other courses taken. We will focus on understanding how businesses create/destroy value and how to change this, and discuss if this is in the price or not.
You draw on > 30 years of my experience: advising and analyzing companies, creating a new framework for analysis and investment, and as part of senior management at Morgan Stanley, plus as an academic researcher, auditor and participant in accounting regulation. My objective is to pass on as much of this knowledge to you as possible.
Value Investing in Credit Markets (B8012)
Corporate credit markets are a central part of US capital markets. This course will focus on evaluating and investing in individual credits using a classic Value Investing methodology. It has two main objectives. The first is to introduce students to the basic structure of existing corporate credit markets; the differences between bonds and bank loans, the nature of covenants and institutional versus market-based lending more generally. The second objective is to develop students' abilities to identify and evaluate particular credit investment opportunities, including both non-distressed and distressed debt across the capital structure.
This course will rely heavily on case studies and guest speakers.
Value Investing with Legends (B8378-001)
This class combines Value Investing in Term A with the Value Investing with Legends lecture series in Term B. Term A is intended to teach students the fundamentals of the value approach to investment management developed by Graham and Dodd. This will be done through a combination of formal lectures, cases and in-class valuation discussions. The substantive areas covered will include (1) the fundamental assumptions and approaches to value investing, (2) techniques for assessing fundamental value – balance sheet and earnings power approaches, (3) structuring value-based portfolios to control risk and (4) designing strategies for searching efficiently for value investing opportunities. The second half of the semester (Term B) is intended to expose students to the practical implementation of Graham and Dodd investing principles. Through presentations by leading value investors, students will learn how individuals develop an investment process to suit their personality and personal biases. Investors will discuss: 1. search strategy, 2. valuation approach, 3. research techniques, and 4. risk management in the context of their own investments.
Executive Education Courses
The accounting group is proud to contribute to the success of Columbia Executive Education, which offers top-rated nondegree programs for executives at all levels.
Our faculty members lead this popular Executive Education course:
The accounting division offers two PhD-level seminar courses. Both courses have a methodological focus as opposed to a topical focus: rather than offering a managerial accounting seminar and a financial accounting seminar, we offer an empirical seminar and a theory seminar, which cover both financial and managerial accounting research.
The Theory Seminar provides an introduction to research into accounting phenomena using analytical methods. The course covers research papers and follows the evolution of research ideas across different papers. The topics covered include contracting within the firm, accounting-based valuation and disclosure.
The Empirical Seminar introduces students to empirical research in both financial and managerial accounting. Students are exposed to a wide range of empirical research methodologies, including large sample archival research, small sample nonparametric methods, and field-based research. The topics covered include stock market valuation of financial information, positive accounting theory, equity valuation, contracting, corporate governance, and auditing.
In addition to the two seminars, our PhD students take required PhD-level courses in statistics, economics, and econometrics and elective courses in allied disciplines such as finance and economics.