Syllabus
FIN362: Financial Statement Analysis
Fall 2009, Section 1
CLASS MEETINGS
Tuesdays and Thursdays, 1100 – 1215, Room 108 ZSH
INSTRUCTOR
Pamela Peterson Drake, PhD, CFA
OFFICE
Room 335 ZSH | 568-6530
OFFICE HOURS
Tuesdays and Thursdays, 0900 – 1000
Tuesdays and Thursdays, 1400 – 1600
REQUIRED COURSE
MATERIALS
OPTIONAL MATERIAL
Online readings, available through Blackboard
Wall Street Journal (Online or paper)
Thomas R. Robinson, Hennie van Greuning, Elaine Henry and Michael A.
Broihahn, International Financial Statement Analysis, CFA Investment Series,
John Wiley & Sons, Inc.2009.*
PURPOSE OF THE COURSE
The purpose of this course is to prepare the finance major to use and interpret
economic and accounting information that is essential in financial analysis and
valuation. This course assumes that the student has successfully completed the
prerequisite course, COB 300, which covers the basics of financial statements,
the time value of money, and financial planning and strategy. This course
provides a foundation for further study in managerial finance and investments.
LEARNING OUTCOMES
LO-1
LO-2
LO-3
LO-4
LO-5
*
Distinguish between issues of legality and issues of ethics, and
distinguish between legal and illegal actions that affect financial
reporting. Develop and defend a position on ethical versus unethical
behaviors.
Explain the differences between U.S. generally accepted accounting
principles (U.S. GAAP) and International Financial Reporting Standards,
and analyze the potential for management of financial statements.
Calculate and interpret financial ratios and trends that capture the
liquidity, solvency, activity, and profitability of a business enterprise.
Differentiate between cash flow and earnings information, and between
book and market values of assets, liabilities, and equity, and relate this
information to the valuation of a business enterprise.
Integrate economic analysis, industry analysis, and financial ratios to
provide an evaluation of the current and projected financial condition
and performance of a business enterprise, as well as the enterprise’s
sustainable growth.
New and used copies are available through online book companies, such as Amazon.com.
1
Grading
Your grade depends on the following items, with weights noted:
Item
Weight in course grade
Exams
Exam 1
Exam 2
Final exam
Total score for exams
15%
15%
15%
Periodic reports
Final report
Total weight for project
25%
20%
45%
Individual project
45%
Participation/presentations
Total for the course
10%
100%
The grade for the course is assigned using the weighted average of your scores, assigned according to the
following scale:
[93 < P < 100] = A
[89 < P < 93] = A[87 < P < 89] = B+
[83 < P < 87] = B
[79 < P < 83] = B[77 < P < 79] = C+
[73 < P < 77] = C
[69 < P < 73] = C-
[67 < P < 69] = D+
[63 < P < 67] = D
[59 < P < 63] = D[P < 59] = F
Class policies
1. Honor Code. The James Madison University Honor Code governs all student activities throughout the
course. Students’ written work will be examined closely, using SafeAssign, for violations of the Honor Code.
2. ADA. Students may seek accommodations in accordance with the Americans with Disabilities Act of 1990.
Students with disabilities needing academic accommodations should review James Madison University's
ADA Policy and work with the James Madison University’s Office for Students with Disabilities. Students
requiring special accommodations under ADA for testing situations must provide at least one week notice of
the need for such accommodation.
3. Responsibilities. Each student is responsible for keeping up with the class schedule, checking email, and
checking the course web site on a regular basis.
4. Incompletes. There are no incompletes for this course, except in the case of extraordinary circumstances
(e.g., excessive absences due to severe illness) and the instructor determines that an incomplete is most
appropriate.
5. Examinations. There are no make-up exams. If a student misses an exam and can provide a written,
verifiable medical excuse that states that the student was too ill to attend the examination, the other two
exams will be reweighted such that they each have equal weight and all exams comprise 45 percent of the
grade.
6. Deadlines for assignments. Students missing deadlines for assignments will receive one lower whole grade
on the assignment for each 24 hours in which the assignment is late.
7. Attendance. Class attendance is expected and required. Absences will result in lower participation scores.
8. Participation. The participation score reflects class attendance, prepartion for and participation in class
meetings, and presentations of project reports.
2
Schedule
FIN362: Financial Statement Analysis
Fall 2008, Section 1
Class meeting
Topic
1
Tuesday
August 25
Financial accounting information
2
Thursday
August 27
Applications
3
Tuesday
September 1
Sources of economic value
4
Thursday
September 3
Industry analysis
5
Tuesday
September 8
Financial accounting information
6
Thursday
September 10
Financial statement analysis
7
Tuesday
September 15
Financial statement analysis
8
Thursday
September 17
Financial statement analysis
9
Tuesday
September 22
Cash flow analysis
10
Thursday
September 24
Common size analysis
11
Tuesday
September 29
Sustainable growth
12
Thursday
October 1
Exam 1
13
Tuesday
October 6
Management of financial statements
14
Thursday
October 8
Management of financial statements
15
Tuesday
October 13
Management of financial statements
16
Thursday
October 15
Ethics in financial reporting
17
Tuesday
October 20
Forecasting
18
Thursday
October 22
No class
19
Tuesday
October 27
Valuation fundamentals
20
Thursday
October 29
Dividend discount valuation
21
Tuesday
November 3
Free cash flow valuation
22
Thursday
November 5
Residual income valuation
23
Tuesday
November 10
Method of multiples
24
Thursday
November 12
Valuation comparisons
25
Tuesday
November 17
Sensitivity analysis
26
Thursday
November 19
Exam 2
27
Tuesday
December 1
Presentations of individual projects‡
28
Thursday
December 3
Presentations of individual projects
Tuesday
December 8
Comprehensive Final Exam [1030-1230]
Report†
1.1 Description of line(s) of business
1.2 Description of industry
1.3 Forward looking analysis
2.1 Selection of ratios
2.2 Ratio analysis
2.3 Cash flow analysis
2.4 Common size analysis
2.5 Shareholder ratios
3.1 DCF valuation
3.2 Multiple valuation
Comprehensive final project
Readings are available online through the Blackboard site and through Course Communications.
†
Due by 8:00 AM on the specified date. Electronic versions must be submitted using the appropriate link in Blackboard, but
printed copies of the reports are due at the beginning of class on the due date. Three students will make brief (5 minute)
presentations from these reports to the class on the designated due date.
‡
The presentation are optional and can only improve upon a student’s project grade. Advance sign-up required for these
presentations.
3