BADM 622
Financial Reporting and Analysis
On-Line Edition
All Information Contained Herein is Subject to Change or Revision. If changes do
occur, students will be notified in writing or through an electronic posting through eCampus.
Dr. Scott Fleming
Office: B&E 313
Phone: 304-293-7896 (work)
304-614-3573 (cellular)
E-mail: Scott.Fleming@mail.wvu.edu
Course Prerequisites: Acceptance into MBA program
Course Description: The course encompasses the following topics:
(1) Development and preparation of financial statements, including the balance
sheet, income statement and statement of cash flows.
(2) Investigation of the underlying conceptual/theoretical foundation of
accounting information.
(3) Analysis of business transactions, including operating, investing and
financing activities and their affect on financial statements.
(4) Analysis of financial statements as a basis for decision making, including
assessing the quality of the financial statements.
(5) Analysis of the association between accounting information and company
valuation
Required Text: Fraser & Ormiston, Understanding Financial Statemetns, 6th ed. or later
Supplemental Reading:
The Wall Street Journal and Other Business News Sources
Extensive Use of Internet Sites Discussed in Class
Course Objectives: In general, BADM 622 is concerned with the production and analysis
of financial information, information used by external stakeholders for planning, control,
and decision making. Upon completion of BADM 622, participants will be able to
examine and read financial statements, recognize how business transactions affect
financial statements, compare and consider how accepted accounting choices affect the
numbers presented in financial statements, and analyze financial statements as a basis for
decision making, including the impact on company valuation. In short, students will be
able to collect appropriate financial data, analyze the data, identify potential problems,
and make informed decisions.
The initial portion of BADM 622 includes a conceptual introduction to assets, liabilities,
stockholders equity, revenues and expenses as well as the impact of operating, investing
and financing transactions on cash flow, income determination, and the balance sheet.
In addition, many transactions can be accounted for using alternative methods that are
considered “generally accepted accounting principles (GAAP)” by the accounting
profession. As a result, financial statements and related disclosures for different
companies may appear different when, in fact, they are economically equivalent.
Therefore, to understand the numbers contained in financial statements, one must
understand the process by which accounting numbers are generated. In some cases, the
choice of accounting policies is affected by ethical considerations. When applicable,
these ethical considerations will be presented in the modules.
Also, research demonstrates a significant correlation between accounting information and
company valuation, including prices traded on the stock exchanges. Factors influencing
valuation will be examined and students will explore the relation between accounting
information and valuation.
Finally, because financial accounting and disclosure are only a portion of the information
set utilized by decision-makers, the course will include a financial statement project
where companies in the same industry are compared. As part of this project, students are
required to analyze financial statements for one company and gather additional
information from sources other than the financial statements. Details related to this
project will be provided separately.
Grading Policy:
(1)
Exams
Sample Quiz
Quiz 1
Quiz 2
Quiz 3
Quiz 4
Quiz 5
Quiz 6
Quiz 7
Quiz 8
(2)
Project
Financial Statement Analysis Team Project
Phase I
Phase II
Phase III
Phase IV
Phase V
Total
Points
0
20
20
20
20
20
20
20
20
20
20
20
20
20
260
The following grading scale will be used to assign grades at the end of the semester:
Grade
A
B
C
D
F
Interpretation
Excellent
Good
Satisfactory
Poor
Points
234
208
182
156
Below 156
Percentage
90%
80%
70%
60%
Below 60%
Exams: The exams will cover the material presented in the required text and module
presentations.
Homework: Most, if not all, of the homework is demonstrated through the supplemental
slides and/or videos. By demonstrating (solving) the homework, it allows you the student
to both follow along with the concepts and problems discussed and practice Excel in a
problem solving manner. Although you witness me solving the homework, that doesn't
necessarily mean that you know how to do the same. This is why all homework must be
performed by the student and submitted for a grade. Please submit the homework via eCampus.
Financial Statement Project: As part of the learning experience, course participants will
analyze financial information for one public company. This project will proceed in
phases where student teams of no less than two or more than three persons analyze the
balance sheets, income statements, and statements of cash flows of a publicly traded
company. Students will download copies of the companies’ annual reports. The annual
reports will be supplemented with investment analyses from Standard & Poors and Value
Line, recent news stories from the financial press and the internet, industry and key
competitor information from various sources and recent quarterly information from
EDGAR (available on the internet). Students will be provided with a series of questions
and assigned the responsibility to analyze the information and present a formal business
analysis related to the investment potential of the company.
Sample companies to consider:
Banking -- Huntington National Bank or Bank of America
Retail -- Wal-Mart or Sears
Oil & Gas -- ExxonMobil or Chevron
Semi Conductors -- Intel or Advanced Micro Devices
Computers -- IBM or Cisco
Pharmaceuticals -- Mylan or Merck
Food -- Kraft or Archer Daniels Midland (ADM)
Transportation -- Ford or GM
Home Improvement / Construction -- Home Depot or Lowes
Telecommunications -- AT&T or Verizon
Students will be assigned to teams at the start of week 1 (Module 1) and companies will
selected in Module 4.
Topical Outline and Assignments
Module 1
Welcome, introduction, and syllabus; capital markets
Economies, exchanges, currencies, risk, SEC acts
FASB, IFRS, CPAs, audits, credit rating agencies
Project Phase 1
Quiz #1
Module 2
DJ Industrial Average & component industries, financial statements, electronic sources
Segments, Full Disclosure Act, notes to financials, MD&A, Analysts
Stocks, Bonds, EPS, fully diluted EPS
Project Phase 2
Quiz #2
Module 3
Accounting equation, definitions, accrual accounting, debits & credit, “T” accounts
Transactions, simple balance sheets and income statements
Vision-Mission-Strategy-Tactics
Project Phase 3
Quiz #3
Module 4
Balance Sheet: Assets, Liabilities, Owners’ Equity
Phase 4 work-in-progress
Quiz #4
Module 5
Income Statement: Revenue, Expense, Discontinued Operations, Extra-ordinary Items
Phase 4 work-in-progress
Quiz #5
Module 6
Statement of Cash Flows: Operating Activities, Financing Activities, Investing Activities
Phase 4 work-in-progress
Quiz #6
Module 7
Common size statements, vertical analyses, horizontal analyses, CAGR
Liquidity & debt ratios
Efficiency ratios, Market Ratios, Beta, Investment ratios (capex), Comparables
Comparables, CAPEX, Beta, Du Pont analysis
Phase 4 work-in-progress
Quiz #7
Module 8
Cost-Volume-Profit, fixed & variable expenses (direct costing)
Information for internal decision making
Overhead
Budgeting & forecasting
Quiz #8
Module 9
Application: Best practices, benchmarking, investment, purchase
Valuation
Presentation skills
Presentations
West Virginia University is committed to social justice. I concur with that commitment
and expect to foster a nurturing learning environment based upon open communication,
mutual respect, and non-discrimination. Our University does not discriminate on the
basis of race, sex, age, disability, veteran status, religion, sexual orientation, color,
national origin or any other basis. Any suggestions as to how to further such a positive
and open environment in this class will be appreciated and given serious consideration.
If you are a person with a disability and anticipate needing any type of accommodation
in order to participate in this class, please advise me and make appropriate
arrangements with Disability Services at 293-6700.