Financial Accounting Electives
Earnings Quality and Fundamental Analysis (B8100)
Financial reporting provides a window into the operational and financial workings of a company. However, translating this information into actionable insights is anything but straightforward. It requires an understanding of Generally Accepted Accounting Principles (GAAP), the quality of financial information, and the adjustments and analyses required to accurately measure and evaluate firm performance, risk, growth prospects, and value. This course is devoted to a systematic study of these topics, often in industry-specific contexts. We will discuss key GAAP in detail, and analyze many actual financial disclosures and accounting abuses. We will also cover standard and not-so-standard financial analysis techniques, and incorporate insights from practitioner and academic research. The primary objective is to acquire a deep understanding of accounting information and how to intelligently use it in making investment and related decisions. Such knowledge is required of executives, bankers, analysts, investment managers, and other sophisticated users of financial information.
Financial Statement Analysis and Valuation (B8110)
This course helps students understand how firms communicate through financial statements. They learn how to:
- use financial statement analysis as an integral part of the strategic analysis of firms;
- interpret financial statements, analyze cash flows, make judgments about earnings quality and uncover hidden assets and liabilities;
- apply financial statement analysis prospectively to forecast and value firms by applying modern accounting-based technologies.
Students are also exposed to the latest academic research on fundamental analysis.
The course has a very practical emphasis, with a wide variety of cases, in-class
exercises and a group project, all involving comprehensive analyses of publicly
traded companies.
Fundamental Analysis of Investment and Management Decisions: A Practical
Guide (B8140)
This course focuses on helping business managers, investors and analysts appreciate
why it is important and how to understand the fundamentals of businesses and
companies, in order to make better decisions. We will also consider how financial
statements and specific accounting issues help or hurt our ability to understand
the company.
We will be drawing on three decades of my own broad experience: advising corporations,
analyzing companies as a ranked sell side analyst, creating a new framework
and technology based data and valuation system for analysis and investment decisions,
and as part of the senior management and finance teams at Morgan Stanley, plus
as an academic researcher, auditor and participant in accounting regulation.
My objective is to pass on as much of this knowledge to you as is possible in
a one semester course. We will also be utilizing the advice and potentially
the participation of several practitioners in the investment and corporate community
with whom I have worked and who are helping in the development of the course.
As such, one objective is to have each student do the fundamental analysis for
at least one company they are interested in e.g. the company they will work
for (or a customer, client or competitor). There will be teams of up to 3 people
who will choose a sector and 3 companies within that sector as the basis for
their assignments. (One of these companies can be the focus of the primary analysis)
I will personally spend time with each team to help provide insight into how
the issues we consider (and others we might not), apply to the company(ies).
The grades will be based on the assignments and a paper analyzing “your”
company, but no exams.
The approach will focus on the business but will cover many topics/concepts
that are covered in typical financial statement analysis, earnings quality,
security analysis and valuation classes. We will focus on understanding how
businesses create or destroy value and what it would take to change this, and
discuss how and why this is in the price or not.
We will also take up to 20 minutes each week addressing any topics that are
in the financial press that bear on the overall theme of fundamental analysis,
to understand what the issue is and its potential implications. As this is a
new course with all new materials, we will keep some flexibility to ensure we
optimize the value of the takeaways for the people in the class.
Every student who puts in effort should walk away with an approach and concepts
that they can utilize in many different businesses and positions. It should
be a fun journey.
