1. Forecasting financial results using information on the company’s strategy, business model, value drivers and historical financial performance.
2. Valuation models – Intrinsic valuation based on DCF models, relative valuation based on multiples. Understanding investment returns, and how valuation models are developed to anticipate abnormal returns.
3. Implement valuation models - Using forecasted financial statements to develop a valuation, and the assessment of that value’s sensitivity to strategic, accounting and financial considerations.

On successful completion of this subject students should be able to:

1. Explain the basic techniques of financial analysis and business valuation.
2. Appreciate the linkage between industry analysis, strategic business analysis, accounting analysis, financial analysis and financial forecasts.
3. Discuss how to use different valuation models, as well as the benefits and limitations of those models.
4. Develop valuation models using spreadsheet software.

A minimum of 80% of in-class hours is required.

In each class there will be a quiz on the pre-class assignment, a lecture session, which will contain the basic material and discuss key concepts from (Damodaran, 2010), and coaching sessions where groups will present their ideas on how to apply these concepts to their case.

Pre-course assignment 20%

• individual part: Read (Damodaran, 2010) Preface, Ch. 1+2 and complete the  preassignment questions on Learn@WU. (10%)
• group (10%):
  • Download financial data for the past 5 years (reported numbers) from Thomson Eikon or Bloomberg or the company website on a full year and quarterly basis. Download also segment data (for the different business divisions).
  • Download the most recent financial reports and analyst presentations.
  • Download analysts forecasts for revenue and EBIT from I/B/E/S (can be accessed via Thomson Eikon)
  • Put the data into a spreadsheet so it can be used for a financial model.

Class participation 10%

Quizzes 20%

At the beginning of session 2 and 3 a short quiz will be administered covering the previous sessions topics.

This will enable students to demonstrate that they have met objectives 1 to 3.

Group Assignment 50%

Teams of students will develop and present a valuation model of a listed firm. Teams will be set up by Sept 24.

This will assess students understanding of the concepts of business valuation and their ability to consider the practical applications. It will also allow students to demonstrate that they can use spreadsheets to tackle practical valuation problems.

Grading will be based on the spreadsheet model, the presentation of the model and the discussion. Each group will also serve as a discussant for another groups model.

This assignment will allow students to demonstrate that they have met learning outcomes 1 to 4.

none

Basic accounting and finance knowledge required.

Students who attended the business planning and performance management courses or with experience in spreadsheet modeling, financial statement analysis and/or DCF analysis will enjoy an advantage. If you want to get a running start, take a look at the following resources (some library links are only available in German, so please see the library info desk if you require assistance):

• Video on integrated planning (approx. 40 minutes), or this one (2 parts, approx. 45 min total). If you want to look at more stuff like this, google “three statement financial model”
• Bloomberg access, especially the getting started guide
• Thomson EIKON access