FINANCIAL STATEMENT ANALYSIS
Course Syllabus for Fall 2015
Professor Wanncherng Wang
General Information
Office: CM4077
Email: linsenw@gmail.com
No. of Credits
Class Room
Class Time
Pre-requisites
Office Hours: TBA
Phone: 07-5252000 ext. 4657
:3
: TBA
: TBA
: Financial Accounting
Course Description and Scope
This course primarily consists of three parts—accounting analysis, financial forecasting and equity
valuation. Part I examines the roles of accounting, in particular the limitations and implications
of financial accounting information for valuation under capital market efficiency/inefficiency, the
current shift to the use of current values, and the implications of the use of current values on the
usefulness of financial reporting. Part II focuses on the integration of accounting framework and
business analysis in the forecasts of financial statements, which means applying accounting
framework in analyzing business activities and the predictions of full sets of financial statements
and important numbers for firm valuation. Part III focuses on the use of accounting information
forecasts in equity valuation. In particular, the course contents will include the following three
components:
Part I
The Creation of
Accounting Numbers
Part II
Forecasting Financial
Statements
Part III
Equity Valuation
Classes will primarily consist of lectures, case discussion and project presentation. Lectures will
provide basic knowledge linking accounting information and equity valuation. Cases and projects
are used to enhance students’ capability in applying the accounting information and the concepts
in business analysis and valuation.
Course Learning Objectives
This course will provide students with both concepts and tools to analyze and exploit information
and therefore prepare forecasting information in corporate financial statements. The ultimate
purpose is to teach students how to use financial statement information for firm valuation and other
economic decisions. To enhance your ability to assess accounting quality, and detect and undo
earnings management, the course contents will also include the issues that corporate managers face
in designing and implementing financial reporting strategies and the issues that how the capital
market evaluate managers’ financial reporting. Analytical framework and practical tools will be
one of the focuses that help students improve their ability to read and analyze financial statements.
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After the completion of this course, students are expected to understand the fundamental concepts
and knowledge related to business practices and financial reporting, based on which students are
able to appreciate interactions among the process of business analysis, the use of information
sets (accounting and non-accounting), financial forecasting, the workings of the capital markets
and valuation.
Academic Integrity
You are required for class participation, exams, case projects, and group work. In completing
these requirements, you must abide by the NSYSU honor code.
Evaluation:
I will evaluate your performance in the course through class participation, assignments, a final
case analysis project and presentation, and a final exam. I will evaluate your overall performance
in the course with the following weights:
Components
Class Participation
Case Report
Case Presentation
Team Members’ Evaluation of Case Contribution
Marks (%)
10
20
15
15
Final examination
40
Total
100
Individual/Group
Individual
Group
Individual
Individual
Individual
Class Participation
Participation is part of the grade. Students should be well-prepared for the class, meaning
reading the assigned materials (text chapters and cases) and carefully thought about the issues
before each seminar. Interactions in the class are highly encouraged, which means coming to
classes with well-reasoned comments or questions, and analysis of cases. Evaluation will be
based not only on the quantity of comments but also the quality of the comments such as raising
alternative viewpoints, and providing well-reasoned challenges to expressed views. Students
may be randomly selected for comments at any time during class.
Written Assignment and Presentation
The assignment involves the analysis and valuation of public companies in a real world setting. It is
a team assignment. Each shall submit a chosen company in the third week of the semester so that
they can keep track of the development and news associated with their selected companies
throughout the course. Students are free to choose their team members.
Final Case Analysis and Presentation
The final case will consist of the fundamental analysis of financial statement information and the
valuation of a company, which closely reflect the content of the course. The purpose is to equip
students with the ability to apply the skills learned in the course.
Students will present their final case in the last three weeks. To encourage active participation
and to discourage free-riding, all students shall submit an evaluation of your teammates for the
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final case. Teammates’ evaluations are confidential and the average scores of your team members’
evaluation will be part of your contributions will be incorporated in the class participation
component of your grade. There will be a peer evaluation form and students should send their
evaluations to professor via email. Collusion in peer evaluation is prohibited.
Final Exam
There is an open book final exam before the final case presentation. It will consist of questions
asking you to analyze the financial statement information and the valuation of a company, which
closely reflect the content of the course. The final exam will be held one week before the first
week of the case presentation. There is a recess week before the final exam.
Required Texts and Readings
1. Required Text
Lundolm & Sloan. Equity Valuation and Analysis with eVal. 3rd Edition McGraw-Hill, 2013
The eVal software website: http://www.lundholmandsloan.com/software.html
2. Reference Text
Palepu, Healy & Peek, Business Analysis and Valuation: IFRS Edition, Text and Cases. 3rd
Edition. Cengage Learning, 2013
Schedule
Week
1
2
3
4
5
6
7
8
9
10
Progress
PART I: INTRODUCTION
Chapter 1 Introduction and Overview
Case: The Gabelli Utility Trust
PART II: BUSINESS STRATEGY ANALYSIS
Chapter 2 Information Collection
Building eVal (Part A)
Chapter 3 Understanding the Business
Case: Overstock.com: Questions 1-2
PART III: ACCOUNTING ANALYSIS
Chapter 4 Accounting Analysis
Case: Overstock.com: Questions 3-6
PART IV: FINANCIAL ANALYSIS
Chapter 5 Financial Ratio Analysis
Case: Overstock.com: Questions 7-9
Chapter 6 Cash Flow Analysis
Case: Interpreting Margin and Turnover Ratios
PART V: FORECASTING
Chapter 7 Structured Forecasting
Case project with eVal simulation
Chapter 8 Forecasting Details
Case project with eVal simulation
PART VI: VALUATION
Chapter 9 The cost of Capital
Case project with eVal simulation
Chapter 10 Valuation
3
11
12
13
14
15
16
EnCom Corporation - Stage 3 Questions
Chapter 11 Valuation Ratios
Case: Determinants of Valuation Ratios: The Restaurant Industry in 2011
Chapter 12 Some Complications and a Comprehensive Case
Case: The AOL Time Warner Merger
Recess
Final Exam
Case Presentation
Case Presentation
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