Valuation

Introduction

Financial professionals offer advice, provide valuable information and help corporations in their investment, operational and financing decisions. A common component and requirement is the ability to analyze the financial statements in order to determine a company's value, project future earnings and cash-flows, identify risks, spot opportunities for cost reduction and/or efficiency increase, understand the effects of tax, regulatory or policy changes, appraise the sustainability of the firm’s activities, and so on.

Students will acquire skills to analyze and interpret financial statements in a meaningful way. For this reason the course teaches the relevant material by examining real company data. The course also gives student Excel modeling skills and hands-on experience using Bloomberg terminal to gather and analyze financial data.

The course is essential to anyone who will work in the field of applied finance as understanding of financial statements is the basis of financial analysis.  Financial analysis is a daily consideration for a corporate finance professional working within a firm or working as a consultant to a firm, working within investment banking, asset management, or in many other positions.

We emphasize the link between various financial statements, understanding what the numbers in the various statements mean and how to compute performance, cost of capital, and the various types of risks. The course covers the key topics of who demands financial statements, who supplies, where to find the critical information financial analyst would need in decision-making. We examine how to analyze financial statements across firms or across time, how to construct various ratios, and how to develop statement-based performance measures. We focus on the fundamental issue of valuation and we study selected applications of the topic to the cost of capital estimation and risk management.

Course content

• Introduction to financial statements and bookkeeping. Understand the relation between statements.
• Accrual-based versus cash-flow-based performance measures
• The analytical income statement and balance sheet. Relate metrics, e.g. sales and working capital (WC)
• Profitability measures, analysis and forecasts
• Capital structure and Cost of Capital
• Pulling it all together: Valuation