Accounting, Valuation and Financial Economics

Introduction

The firm is an essential part of any modern business environment. In this course you will be given a solid introduction to three different, but still highly related, business areas – accounting, economics and finance – that all offer insight into how firms are valued. The course starts by introducing important concepts and terms from financial reporting, covering, e.g., income statements, balance sheets and cash flows. The course then continues with consumption and investment theory both under certainty and uncertainty. Finally, you will learn key aspects of financial markets and be given an introduction to asset pricing.

Course content

Financial statements

• Income statements, balance sheets and cash flow
• Reformulation of income statements and balance sheets

Valuation techniques

• Discounted dividend valuation
• DCF valuation
• Relative valuation

Consumption and investment decisions

• Consumption and investment as intertemporal choices
• The interest rate and saving
• Marginal revenue product of capital and investment
• Consumption and investment under uncertainty

Financial markets and the efficient market hypothesis

• Portfolio Theory
• The capital asset pricing model (CAPM)
• Asset pricing theory (APT) and factor models