The goal of the course is to teach students how to perform financial statement analysis and business valuation. It introduces corporate reporting as one of the main information sources for business decision makers and provides insights into the usefulness and limitations of financial statement analysis in different decision contexts (e.g., investment decisions).
Students learn the financial statement analysis tools that enable them to practically conduct business valuation, including industry and corporate strategy analysis, accounting analysis, financial analysis, forecasting methods and valuation models.
After completing this course the students will have the ability to:
- Use IFRS-based financial statements as one of the main sources of information for conducting a wide range of business analyses, such as
- Link a firm’s accounting information with its strategy;
- Identify red flags of potential misrepresentation in financial statements;
- Reformulate financial statements (i.e., balance sheet, income statement and cash flow statement);
- Make accounting adjustments to “undo” accounting distortions and to properly capture a firm’s economics;
- Compute a firm’s financial ratios and interpret ratios from an analyst’s perspective;
- Use financial ratio analysis to evaluate a firm’s operating, investment and financing efficiency;
- Forecast financial statements;
- Value a firm using various valuation techniques such as valuation multiples, dividend discount model, discounted cash flow model and discounted abnormal earnings model.
- Apply common tools of financial statement analysis to conduct a comprehensive analysis
- Prepare forecasted financial statements as the basis for valuation
- Apply accounting-based valuation models
After completing this course the students will also have the ability to:
- Confidently conduct financial statement analysis in various decision contexts (like from the perspective of managers, security analysts etc.)
- Recognize the most important aspects of the analysis depending on the decision context
- Acknowledge the need for and potential sources of additional information required for conducting a comprehensive analysis
Formulate a final valuation decision resulting from the comprehensive analysis
PI - 80% minimum presence in lectures.
The teaching material is based on an international text book. Part of the material is presented during lectures and part of it is intended for self-study. Numerous examples and cases of European firms are used to support the discussion of business analysis and valuation throughout the course. Working through problems and exercises, at the lectures and individually, further reinforces the material covered and encourages analytical thinking.
The course evaluation is based on (1) a term project (45%), (2) in-class participation (10%) and (3) a final exam (45%).
(1) Term project (45%)
The project is designed for students to practice the kind of unstructured problems often emerging in the business world. As part of the project, students complete four homework assignments at predetermined dates. In each assignment students perform consecutive steps of financial statement analysis of a real world company. Based on these homework assignments, a final report is due at the end of the course that summarizes and elaborates the results of the financial statement analysis. The final grade of the project is based on the homework assignments and the final report:
- 5% Homework 1 "Company Overview"
- 5% Homework 2 "Template Ratio Analysis"
- 5% Homework 3 "Template Forecasting"
- 5% Homework 4 "Template Valuation"
- 25% Final Report
In total the project constitutes 45% of the course grading.
(2) In-class participation (10%):
Students must read and prepare cases that are discussed in class.
10% in-class participation.
(3) Exam (45%):
The final written exam covers the contents of the course.
45% Final Exam