• Read and understand financial statements including notes in the annual report
• Apply financial statements for decision making including profitability analysis, credit analysis and firm valuation
• Apply microeconomic principles to decision making within a firm
• Explain how perfectly competitive markets function
• Apply game theoretic models to analyze strategic situations

Managerial economics deals with resource allocation and strategic decisions made by managers. The course shows how microeconomic principles can be applied to company decision making. The emphasis is on stylized practical problems that may face anyone in a management position. The three main sections of managerial economics are supply & demand analysis, pricing strategy, and the economics of information. Cost analysis is necessary to determine the most cost efficient method of production, including which components are better sourced from other companies. An understanding of costs, together with demand conditions, is also important in deciding how products should be priced. The second part of the course deals with demand, market segmentation, and the use of quality and quantity discrimination. In the final part the focus is on game theort and the role of asymmetric information and here we cover both economic incentives and bidding in auctions.

Financial statement analysis is the process of reviewing and analyzing a company's financial statements to make better economic decisions. Financial statement analysis consists of four main sections. First, we introduce the components of the financial statements including the income statement, balance sheet, statement of changes in owners’ equity and cash flow statement and show how transactions are recorded (basic debit-credit entries) and how these transactions enter into the financial statements. We also address the conceptual differences between accrual and cash flow based accounting. Second, we show how profitability and credit risk can be measured. Key financial ratios are defined and analysed and we discuss why it is crucial that accounting data are measured consistently across time and firms. Third, forecasting is essential as it serves as the foundation for many business decisions including whether to extend loans to firms or estimating the value of a corporation. Thus, we address how to develop prom forma statements (i.e. income statement, balance sheet and cash flow statement), which articulate. We also address how to add realism in the projected earnings and cash flow measures. Finally, we discuss the different valuation approaches and their strengths and weaknesses. The concept of cost of capital is also introduced and different techniques to estimating cost of capital are discussed.

Syllabus will be available, well in time, before the first session.