JOHNS HOPKINS UNIVERSITY
CENTER FOR LEADERSHIP EDUCATION
THE WILLIAM P. CAREY PROGRAM IN ENTREPRENEURSHIP AND MANAGEMENT
FINANCIAL STATEMENT ANALYSIS, EN 660.304.01, Fall 2009
TTH 12-1:15pm
Hodson 316
INSTRUCTOR:
Annette Leps, CPA, MBA
Center for Leadership Education
Rm. 102, Whitehead Hall, x 7113
Email: aleps@jhu.edu
Office Hours:
MON
1:30-2:30pm
TUES
11-Noon
WED
1:30-2:30pm
& by appointment
COURSE ASST:
Megan Wei
Email: megan.wei@jhu.edu
Office Hours: TBA
COURSE DESCRIPTION:
Financial Statement Analysis: This course is designed to increase a student’s ability to read and
interpret financial statements and related information. In addition to a review of the basic
financial statements and accounting principles, the course will use industry and ratio analysis in
addition to benchmarking and modeling techniques to encourage students to think in a more
creative way when analyzing historic information or when forecasting financial statements.
Students will assess firm profitability and risk, value assets and use spreadsheet models for
financial forecasting and decision making.
PREREQUISITE:
Financial Accounting, EN.660.203
REQUIRED TEXT:
Peterson and Fabozzi,, Analysis of Financial Statements, 2nd edition, 2006, John Wiley & Sons,
Hoboken, NJ. ISBN 978-0-471-71964-9.
COURSE OBJECTIVES:
This course has many objectives. A few key objectives include:
1. Encourage thinking in a new and more creative way when analyzing or forecasting financial
information
2. Introduce new tools common to financial statement analysis and how to use them in practical
applications
3. Understand how financial statement information can help solve business problems
4. Increase your ability to read and understand financial statements and related information
5. Practice communicating decisions and ideas through oral and written communication
6. Develop a conceptual understanding of financial reporting, financial statement analysis and
valuation, and
7. Appreciate and learn how to measure “earnings quality” and its direct implication on valuation
and for other uses of financial statements
USE OF BUSINESS CALCULATORS:
This course involves the use of certain mathematical formulas and functions which are pre-programmed
into such business calculators as the HP 10B, 12C, and 17B and the TI BA 35, BA II Plus, etc. Use of
these calculators is allowed. However, please note that students are not expected to purchase one of these
calculators for this course and there will be no instruction provided in their use. All subject material
involving the time value of money can be solved using EXCEL.
STUDENT RESPONSIBILITIES AND CLASS POLICIES:
(1) Class attendance is vital to the successful completion of this course. Students are expected to
come to class having read the material referenced.
(2) Students will be assigned group work, asked to research selected topics/companies and present
their findings to the class. Attendance is required for all presentations. While a “group” grade
will be awarded, individual absences and peer evaluation will factor into the individual grade.
(3) The focus of examination(s), cases, and assignments will be on qualitative and quantitative
analysis. Calculators or EXCEL are permissible for use during all exam(s) and cases.
(4) Students are expected to complete all assignments, present group work and take test(s) on the
required dates. Conflicts or other issues must be brought to the attention of the instructor before
the scheduled test time. Make-up exams may be arranged only at the discretion of the instructor
and the Department.
(5) It is the responsibility of the student to obtain notes and assignments from colleagues for any
classes that were missed.
(6) No Senior Options will be offered.
COLLEGE POLICY REGARDING STUDENT DISABILITIES:
If you have a disability that requires special testing accommodations or other classroom
modifications, please present a letter from Dr. Richard Sanders (Director of Academic Advising
in Arts & Sciences) stating the disability and the exact accommodations needed. I will do my best
to accommodate you in any way. Please do not be shy about coming forward.
ACADEMIC ETHICS
The strength of the university depends on academic and personal integrity. In this course you
must be honest and truthful. Ethical violations include cheating on exams, plagiarism, reuse of
assignments, improper use of the Internet and electronic devices, unauthorized collaboration,
alteration of graded assignments, forgery and falsification, lying, facilitating academic
dishonesty, and unfair competition.
Report any violations you witness to the instructor. You may consult the Associate Dean of
Student Affairs and/or chairman of the Ethics Board beforehand. See the guides on “Academic
Ethics for Undergraduates and Ethics Board Website (http://ethicsjhu.edu) for more information.
FIELD TRIP AND ATTIRE:
We have been invited by McCormick & Company’s Investor Relations group to visit their corporate
headquarters and experience, first hand, what a financial analyst hears and sees when meeting with a
company. This two hour field trip is planned for October; attendance is highly recommended but not
mandatory. Directions from the Homewood campus to McCormick & Company are:
Take I-83 North to Exit 20A-Shawan Road. Continue for one mile to York Road. Turn left on York
Road. Continue for 1.9 miles. Turn left at the second traffic light (Loveton Circle). Continue for .4 mile.
(You will pass a McCormick #10 address; this is not your destination). Turn right into the McCormick
driveway, #18 Loveton Circle, and follow “visitors” sign.
Attire for the trip: The class will follow McCormick & Company’s casual dress policy meaning no jeans,
sneakers, shorts or t-shirts.
EVALUATIONS:
A 90-100
B
80-89
C
70-79
D 60-69
F
Below 60
Pluses and minuses will be used at the discretion of the instructor.
GRADING:
Test #1
McCormick Assignments #1-#6
McCormick Assignment #8
Cumulative Final Exam
Case Studies
Group Presentations
Total
20%
5
5
25
20
25
100%
The Instructor reserves the right to change topics and assignments as needed depending
upon class progress.
ELECTRONIC RESERVES: (the password is LEP304):
Assigned readings have been posted to Reserves’ readings page at
http://reserves.library.jhu.edu/access/reserves/findit/articles/index.php.
A unique password has been applied to the electronic readings list.
To log into the course, open Reserves’ readings page and click on log-in
form. Please be advised that the password is LEP304.
For users accessing readings from off-campus, information about remote access
is available at
http://www.library.jhu.edu/services/computing/remoteaccess.html.
Please note that the password is additional security and does not replace
JHED IDs. However, readings are also available to registered course students
at the University’s Portal at http://my.jhu.edu .
CLASS TOPICS AND ASSIGNMENTS
WEEKS 1-3: September 3-September 17
Required Reading—Fabozzi Chapters 1, 2 and 3
Electronic Reserves—Frazer and Ormiston, Understanding Financial
Statements, 9th edition, chapter 5; Palepu & Healy, Business Analysis and
Valuation Using Financial Statements, chapter 1
Topics: Financial Analysis and the Big Picture
Accounting abuses and Sarbanes-Oxley
Financial Statements and Quality of Information
Advanced Accounting Topics
“Mini” case: due September 15th:
Investigate the accounting crises that led to valuation issues in early 2000’s (Quest, Arthur
Anderson, Enron, WorldCom, Tyco, Adelphia, research institutions (Merrill Lynch, Goldman
Sachs and Citigroup) and in 2008 (AIG, Bear Stearns, Countrywide Financial Corp., Fannie Mae
and Freddie Mac, Lehman Brothers Washington Mutual, Dreier LLP, and Madoff Investment
Securities).
Work Ahead: In order to ease your work load in the coming weeks, use your free time to
complete the McCormick Intro and Assignments #1 and #2 in advance of their due date.
WEEKS 4-6: September 22 through October 13
Required Reading: As noted in McCormick Assignments
Topics: Annual report information and performance evaluation using ratio analysis
Bloomberg Terminal demonstration
Homework: McCormick Assignments
9/22-Intro and Assignment #1
Test #1: September 24 (Materials covered Weeks 1-3)
9/29-Assignment #2 and #3(1-9)
10/1-Assignment #3(10-23) and #4(1-8)
10/6-Assignment #4(9-15) and #5
10/8-Bloomberg Terminal demonstration*
10/13-Assignment #6 and #7(in class)
October 20-Assignment #8 paper due
*Electronic Resource Center on the M-level of the library
WEEKS 7-8: October 15-October 22
Required Reading: Electronic Reserve Higgins, Analysis for Financial Management, Chapter 3
Topic: Financial Forecasting and EXCEL (bring laptops to class)
Valuation using forecasted free cash flows and price/earnings multiples
Homework: Finished financial model
WEEKS 8 -10: October 27-November 5.
Required Reading: Fabozzi Chapter 5
Electronic Reserve-Gitman, Principles of Managerial Finance, chapters 8 & 9
Topics: Time Value of Money and Valuation using EXCEL (bring laptops to class)
Homework:
Assigned cases due November 17
WEEKS 10 -12: November 10-November 24
Required Reading: Fabozzi Chapter 7
Electronic Reserve-Fortune Magazine “The Real Key to Creating Wealth”,
September 20, 1993
Topics: Cost of Capital and Economic Value Added
WEEK 13
Topics: Company Analysis and Valuation
Homework: Presentation materials due 12/1; oral presentations begin.
FINAL EXAM: December 14, 2-5pm