This course is aimed at all master students who expect at some point in their careers to use financial statements to evaluate the performance, prospects, and value of a business. The focus will be on the following objectives: a) earning capabilities of analyzing complex financial statements b) earning capabilities to generate and manage business scenarios for management reporting purposes.
This course will be particularly valuable to students who are seeking a career in accounting, consulting, audit, corporate finance, investment banking, hedge funds, or private equity.
The objective of the course is to acquire competences in preparing, interpreting, and transmitting financial information to the management, in order to support them in the decision-making process and also to have a better understanding of data as managers. Students will be exposed to tools of financial and managerial analysis, theoretical concepts, and practical valuation issues.
Course Content and Organization
Students will be exposed to a comprehensive financial statement analysis and valuation framework that integrates strategy, financial reporting, financial analysis and valuation, application of this framework and tools to fundamental analysis, and the role of intermediaries that use these tools in capital markets. Furthermore, the students will introduce in the world of non-financial accounting, KPMs and the effects on the budgetary control and planning process, using the managerial accounting methods of cost allocation, pricing decisions and capital investment decisions.
Over the semester several guest speakers, such as senior managers from top 10 accounting industry and research analysts / accounting professors from abroad top universities will share their experiences with the students.
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 bias.
- 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.
While doing the above, the course will often take the perspective of equity analysts, short sellers, and hedge fund activist investors. Some of the cases will include protagonists like visiting professionals and academics.
The second half of the course is focus on the budgetary control and planning process, cost allocation and stock-costing methods and the relevant information for decision making. The application of the above framework is realized to a variety of business valuation contexts including CPA analysis, mergers, cost drivers, profitability of products, capital investment decisions.
To deepen students’ ability to apply the course skills in a practical context, they will work on a group project. The project will involve a complete financial statement analysis of a firm using the course framework. Groups will consist of students working individually on related companies, with a group effort to integrate the separate analyses. The last few sessions of the course will be devoted to the development and execution of these projects.