• 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

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;

Class 1: Review of financial statements and financial ratios: balance sheet, income statement, statement of cash flows, key ratios; Case: Santa Fe Trading Company;
Class 2: Pro-forma financial statements and evaluation of investment projects; Case: Hansson Private Label Inc.: Evaluating an Investment in Expansion
Class 3: DCF valuation framework and the cost of capital calculations; Case Eaton Corp.
Class 4: DCF and relative valuation; Case: SUN Brewing
Class 5: Evaluating financial information in the M&A scenario; Case: Sun Micro.

Feedback activity: Students will be asked to analyze financial information and estimate the value of a company (financial statements will be provided). The final exam will also be a case study.

Class 6: Analysis of financial statements in banking; Case: Silicon Valley Bank: Gone in 36 Hours
Class 7: Real estate industry (REITS) analysis; Case: Simon's Hostile Tender for Taubman
Class 8: Health care industry: leveraged buyout analysis; Case: HCA, Inc.
Class 9: How activist investors use accounting data to identify their targets; Case: Kerr-McGee
Class 10: Course review;

6-week course.

Preliminary Assignment: The course coordinator uploads the Preliminary Assignment on Canvas at the end of May. It is expected that students participate as it will be included in the final exam, but the assignment is without independent assessment and grading.

Mandatory readings

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. Santa Fe (provided on Canvas)
2. Hanson Private Label Inc.: Evaluating an Investment in Expansion, Brief Cases, #4021, Rev. March 1, 2010
3. Eaton Corporation: Portfolio Transformation and the Cost of Capital. #9-221-006, June 23, 2021

4. SUN Brewing (B), #9-207-039, Rev. June 28, 2010

5. Sun Microsystems. UV5626. Rev. Oct.9, 2015 

6. Silicon Valley Bank: Gone in 36 Hours. #9-124-001, Rev. March 11, 2024
7. Simon's Hostile Tender for Taubman (A), 9-205-052, Rev. January 19, 2006;
8. HCA, Inc (A), 9-207-076, Rev. December 21, 2011
9. Kerr-McGee, #9-207-020, Rev. July 25, 2012

Required reading materials to be purchased from HBS Publishing at this link: https:/​/​hbsp.harvard.edu/​import/​1213097

Additional relevant readings:
Ivo Welch, Corporate Finance: 5th Edition (Free online access) Ch. 7-10, 14-15, 21