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2018/2019  KAN-CCMVI2073U  Evaluation of Financial Information

English Title
Evaluation of Financial Information

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 60
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Course instructor - Gregory Perelman, Lecturer, Graduate School of Management, University of California, Davis, gperelman@ucdavis.edu
    Sven Bislev - Department of Management, Society and Communication (MSC)
In case of any academic questions related to the course, please contact the course instructor or ISUP academic director, Sven Bislev at sb.msc@cbs.dk
Main academic disciplines
  • Finance
  • Accounting
Teaching methods
  • Face-to-face teaching
Last updated on 05/12/2018

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Compute key financial ratios using financial statements of publicly traded companies
  • Determine financial health of the companies by interpreting key financial ratios
  • Convert data from accounting statements into free cash flows for valuation purposes
  • Apply DCF(discounted cash flow) model for in valuation of projects and companies in various industries and economic conditions
  • Apply relative valuation models using market and transaction multiples
Course prerequisites
Introductory course in accounting is required
Introductory course in finance management is required
Examination
Evaluation of Financial Information:
Exam ECTS 7.5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Max. 15 pages
Assignment type Project
Duration Written product to be submitted on specified date and time.
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: Home Assignment: 25/26 June - 29 July 2019. Please note that exam will start on the first teaching day and will run in parallel with the course.
Retake exam: Home Assignment: 72-hour home assignment: 8-11 October 2019 – for all ISUP courses simultaneously
3rd attempt (2nd retake) exam: 72-hour home assignment: 25-28 November 2019 – for all ISUP courses simultaneously

Exam schedules available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Make-up exam/re-exam
Same examination form as the ordinary exam
Retake exam: 72-hour home project assignment, max. 10 pages, new exam question
Exam form for 3rd attempt (2nd retake): 72-hour home project assignment, max. 10 pages, new exam question
Course content and structure

This course covers the use of financial information to value firms, projects, and securities in a variety of industries under different economic conditions. The course will be largely based on case studies and will focus on learning techniques of financial analysis, selecting an appropriate valuation model, analyzing the quality of financial data, and forecasting financial variables and cash flows. The course assumes that you have a good working knowledge of introductory accounting, finance, and economics. 

 

Preliminary assignment: Read two papers: (1) Introduction to Financial Ratios and Financial Statement Analysis and (2) Assessing a Company’s Future Financial Health; a set of questions will be provided;

Class 1: Review of financial statements and financial ratios: balance sheet, income statement, statement of cash flows, key ratios;

Class 2: Construction of financial statements for a loan application; Case: Santa Fe Trading Company;

Class 3: From accounting statements to valuation process: key approaches to valuation; 

Class 4: Pro-forma financial statements and evaluation of projects; Case: Hansson Private Label Inc.: Evaluating an Investment in Expansion

Class 5: Analysis of financial statements in banking; Case:  Citigroup 2007: Financial Reporting and Regulatory Capital

Class 6: Retail apparel industry; fresh start accounting; Case: Eddie Bauer 

Feedback activity: Students will submit their choices of (publicly traded) companies for the course project and calculate key accounting ratios 

Class 7: Accounting ratios and relative valuation process; Case: SUN Brewing

Class 8: Real estate industry (REITS) analysis; Case: Simon’s Hostile Tender for Taubman 

Class 9: Health care industry: leveraged buyout analysis; Case: HCA, Inc.

Class 10: How activist investors use accounting data to identify their targets; Case: Kerr-McGee

Class 11: Course review: in-class company valuation;

Description of the teaching methods
Lectures, case discussions, in-class exercises
Feedback during the teaching period
Students will be asked to select a publicly traded company and calculate key financial ratios; valuation of the same company will be required for the final course project;

All Home Project Assignments/mini projects are based upon a research question (problem formulation) formulated by the students individually, and must be handed in to the course instructor for his/her approval no later than 11 July 2019. The instructor must approve the research question (problem formulation) no later than 16 July 2019. The approval is a feedback to the student about the instructor's assessment of the problem's relevance and the possibilities of producing a good report.
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
Further Information

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.

 

Course timetable is available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams

 

We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams end February 2019 at the latest.

 

Expected literature

Mandatory readings:

 

Required reading materials to be purchases from HBS Publishing at this link https:/​/​hbsp.harvard.edu/​import/​582211

Notes:
1. Introduction to Financial Ratios and Financial Statement Analysis, 9-193-029, Rev. September 13, 2004
2. Assessing a Company’s Future Financial Health, #9-911-412, Rev. May 28, 2012
3. Business Valuation: Standard Approaches and Applications, UV6586; rev. Nov. 21, 2013
4. Corporate Valuation and Market Multiples, #9-206-039, Rev. January 16, 2009
5. The Cost of Capital: Principles and Practice, #UV6793, Rev. Nov. 13, 2015

Required Cases:
1. Hanson Private Label Inc.: Evaluating an Investment in Expansion, Brief Cases, #4021, Rev. March 1, 2010
2. Citigroup 2007: Financial Reporting and Regulatory Capital, 9-111-041; Rev. October 6, 2010
3. Eddie Bauer (A) 9-110-008, Rev. February 28, 2013; (B) 9-110-009, Rev. August 3, 2010
4. SUN Brewing (B), #9-207-039, Rev. June 28, 2010
5. Simon’s Hostile Tender for Taubman (A), 9-205-052, Rev. January 19, 2006; 
6. HCA, Inc (A), 9-207-076, Rev. December 21, 2011
7. Kerr-McGee, #9-207-020, Rev. July 25, 2012 

 

Additional relevant readings:

 

Ivo Welch, Corporate Finance: 4th Edition, 2017 (Free online access)
Ch. 14-15, 21

Last updated on 05/12/2018