The objective of this class is to provide you with a framework for analyzing a firm’s past performance, estimating its future performance, and valuing its equity. The course integrates key concepts from accounting, finance, economics, and business strategy and applies them to financial decision-making. The course focuses on teaching you to interpret numbers in the financial statements. You should leave the course with the ability to generate reasonably accurate (or at least logically consistent) forecasts of a firm's future financial performance, including revenues, earnings, asset balances and free cash flows.
Learning Outcomes
❖ Have a framework for analyzing a business. We will incorporate key elements that you have learned in your other classes and apply this knowledge systematically to value a business.
❖ Be proficient at calculating and interpreting financial ratios. You will understand how to use ratios to compare a firm to its competitors and to evaluate changes in ratios over time. You will also know how to use these ratios to help forecast the future.
❖ You will understand how accounting errors (either intentional manipulation by management or unintentional mistakes) impact reported income and the book value of equity.
❖ Have a framework for forecasting future earnings and predicting the stock market’s response to earnings announcements.
❖ Be able to read and critically evaluate financial analyst reports on publicly listed companies.
❖ Understand major valuation models. You will learn a unified framework for valuation and so be comfortable moving between discounted cash flow models, residual income models, and models based on market multiples such as the price-earnings ratio and the market-to-book ratio.
- Teacher: Japhet Mutale