The objective of the course is to provide students with hands-on experience in financial statement analysis. Students will be exposed to general tools of financial analysis, theoretical concepts, and practical valuation issues. By the end of the course, students should be comfortable with using firms' financial statements to develop an understanding of their performance and to establish a basis for making reasonable valuation estimates.
Course content and organization:
In this course students will be exposed to a comprehensive financial statement analysis and valuation framework that integrates strategy, financial reporting, financial analysis and valuation, and the application of this framework to fundamental analysis.
The first half of the course develops an accounting-based valuation framework that integrates a firm's strategy, its financial performance, and its accounting credibility. Two main topics will be covered:
Reporting strategy analysis: assessing a firm's value proposition and identifying key value drivers and risks; evaluating the degree to which a firm's accounting policies capture the underlying business reality; assessing a firm's earnings quality; making accounting adjustments to eliminate management biases.
Performance analysis and valuation: evaluating current performance and its future sustainability, making forecasts of future profitability and risk, and valuing businesses using earnings and book value data.
The second half of the course applies the above framework to a variety of business valuation contexts, including equity-investment analysis, IPOs, and mergers.