Financial Statement Analysis & Valuation

Description

This course lets students apply conceptual aspects of financial accounting and reporting to the financial statements of real-world companies. Students will be taught to thoroughly analyse and scrutinise the financial statements of large and well-known publicly-listed companies from the perspective of a financial statement user (for example, an investment analyst, portfolio manager, or investment banking analyst), with the objective of better understanding: differences in the quality of the information in financial statements across different companies; the expected future performance potential of a company; whether or not a company is accurately valued on the stock market. We cover the intricacies of major valuation methodologies (Residual Income, Discounted Cash Flows, and valuation multiples) and the concept of equity and enterprise value. Key to this is interpreting financial statements and all related information to arrive at forecasts of critical value drivers. In addition to the practical focus of the course, many of the issues are discussed in light of supporting academic research on financial statement analysis and valuation. Objectives: On successful completion of this course, the students should be able to: analyse the consequences of accounting distortions for the interpretation of a company's performance and financial position; identify the interdependencies between distortions in balance sheets and income statements and undo these distortions to arrive at more informative financial statements; reformulate financial statements into condensed statements that separately reflect the operating and non-operating activities of a company; compute and analyse a set of financial ratios based on reformulated financial statements; derive forecasts of a company's expected future performance using a comprehensive forecasting approach; derive estimates of the fundamental valuation of equity of a company and the enterprise value using alternative valuation approaches; explain the conceptual and practical advantages of using accounting-based valuation over other valuation methods; apply the insights from academic research to the practice of financial statement analysis and valuation.