Financial Analysis and Valuation

Introduction

The course is taught in English in Oslo (full-time) and in Norwegian in Bergen and BI Nettstudier. The exam can be answered in Norwegian or English.

All corporations have to prepare annual financial statements and companies listed at a stock exchange have to prepare company annual reports which contain more comprehensive information. The main purpose of the company annual report is to provide shareholders and potential investors with decision-relevant information so that they can make up their mind about:

1. The value creation during the financial year and the financial situation at the end of the financial year (the control motive)
2. Likely future cash flows generation capabilities (valuation, sustainability, and credit analysis motives)

However, there are many conditions that have an impact on the numbers as well as the information that are presented in the corporate annual report. Many of these conditions might cause the financial statements to present an incomplete picture of the company's underlying economic reality. The chance that financial information might be surrounded by "noise" makes it even more important to critically assess the quality of financial information before used.

Valuations are commonly made in relation to transactions as mergers, acquisitions, demergers, transitions to next generation, IPO's, in relation to asset pricing or in relation to supervision of the value creation in companies.

Both credit analysis and valuations are based on prognosis for the company's likely future economic development and financial condition (prognosis for future income statement items, balance sheet items and cash flow items). Such prognosis is usually, to a great extent, based on historic profit figures (time series analysis) and on other economic information about the company.

Course content

1. The Corporate Annual Report - Content and Relevance
2. Accounting Standards
3. Main Accounting Issues important for Financial statement Analysis
4. Accounting Quality Analysis
5. Analysis of Historic Financial Results
6. Forecasts and sustainability of the firm
7. Valuation