ELE 3750 Financial analysis and valuation
All corporations have to prepare annual financial statements and companies listed at a stock exchange have to prepare company annual reports which contain more comprehensive information. The main purpose of the company annual report is to provide shareholders and potential investors with decision-relevant information so that they can make up their mind about
- The value creation during the financial year and the financial situation at the end of the financial year (the control motive)
- Likely future cash flows generation capabilities (valuation and credit analysis motives)
However, there are many conditions that have an impact on the numbers as well as the information that are presented in the corporate annual report. Many of these conditions might cause the financial statements to present an incomplete picture of the company's underlying economice reality. The chance that financial information might be sourrounded by "noise" makes it even more important to critically assess the quality of financial imformation befor used.
Valuations are commonly made in relation to transactons as mergers, acquisitions, demergers, transitions to next generation, IPO's, in relation to asset pricing or in relation to supervision of the value creation in companies.
Both credit analysis and valuations are based on prognosis for the company's likely future economic development and financial condition (prognosis for future income statement items, balance sheet items and cash flow items). Such prognosis are usually, to a great extent, based on historic profit figures (time series analysis) and on other economic information about the company.
After completing the course, students will have:
- Acquired an understanding of the financial information that a company produces in an annual report, which is relevant for the analysis and valuation of the company.
- Knowledge of what drives a company's development and a better understanding of accounting from a user perspective.
After completing the course, students will be able to:
- Extract relevant information from the annual report for the purpose of analyzing a company's economic development and / or valuing a company's stock.
- Make an opinion of the extent to which the company's financial information gives a good indication of the underlying economic reality of the company.
The course will help the students to establish an understanding of the motives that underlie accounting fraud. Furthermore, the course will help students get a healthy ethical attitude to what is financial reporting quality.
- The Coporate Annual Report - Content and Relevance
- Accounting Standards
- Main Accounting Issues important for Financial statement Analysis
- Accounting Quality Analysis
- Analysis of Historic Financial Results
The course consists of 45 lecture hours incl. review of assignments. During the semester, there will be given an assignment over three (3) weeks. One of the lectures will be used to review and explain the the elements of the assignment.
The students are supposed to use a spreadsheet program (i.e. Excel) and to have access to internet.
For electives re-sit is normally offered at the next scheduled course. If an elective is discontinued or is not initiated in the semester it is offered, re-sit will be offered in the electives ordinary semester.
The course is offered in English in the fall semester and Norwegian spring semester.
Higher Education Entrance Qualification.
Recommended prerequisites are an introduction course in finance, BØK 1121 or BØK 3423 or equivalent.
|Exam category||Weight||Invigilation||Duration||Grouping||Comment exam|
Form of assessment:
Internal and external examiner
Examination when next scheduled course
|100||No||3 Week(s)||Individual||The paper is not to exceed 18 to 20 pages, in which a given company should be analyzed and valued.|
|Form of assessment:||Written submission|
|Comment:||The paper is not to exceed 18 to 20 pages, in which a given company should be analyzed and valued.|
|Resit:||Examination when next scheduled course|
|Workload activity||Duration||Type of duration||Comment student effort|
|Teaching||45||Hour(s)||Lectures, work-shops, group work with feed back.|
|Prepare for teaching||75||Hour(s)||Working with the text books, exercises and preparing for next lecture. |
|Review of assignments in plenary||40||Hour(s)||The students will get a project to work with during 3 weeks. Then, a full lecture will be used to discuss the project and help the students.|
|Comment:||Lectures, work-shops, group work with feed back.|
|Workload activity:||Prepare for teaching|
|Comment:||Working with the text books, exercises and preparing for next lecture. |
|Workload activity:||Review of assignments in plenary|
|Comment:||The students will get a project to work with during 3 weeks. Then, a full lecture will be used to discuss the project and help the students.|
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.
|Petersen, Christian; Plenborg, Thomas; Kinserdal, Finn||cop. 2017||Financial statement analysis: valuation - credit analysis - performance evaluation||Fagbokforl|