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EXC 2509 Financial Statements and Valuation - RE-SIT EXAMINATION

APPLIES TO ACADEMIC YEAR 2012/2013

EXC 2509 Financial Statements and Valuation - RE-SIT EXAMINATION

Responsible for the course
Sverre Dyrnes

Department
Department of Accounting - Auditing and Law

Term
According to study plan

ECTS Credits
6

Language of instruction
English

Introduction
The main focus in this course is the use of financial statements in decision-making. There are two classes of decision makers that in particular are using financial statements – investors and creditors. Investors need to undertake valuations in order to form an opinion about the company’s intrinsic value, which is key to buy and sell decisions. Creditors need financial statement analysis in order to assess the company’s credit rating.

The collapse of Enron and Andersen, the bankruptcy of WorldCom, accounting irregularities at Qwest, Ahold and Parmalat. These events have brought to our attention more than ever the significance of accounting quality. This course also provides a framework for analysis of accounting quality.

    Objective
    The objective of this course is to provide the student with an understanding of (i) the importance of accounting quality, (ii) the different models for valuations of companies and (iii) the techniques for credit analysis. During this course the student will develop the skills necessary to make own valuations and credit analysis through extensive casework.

    Prerequisites
    Compulsory courses in accounting and finance

    Compulsory reading
    Books:
    Soffer, Leonard C. and Robin J. Soffer. 2003. Financial statement analysis : a valuation approach. Upper Saddle River, N.J. : Prentice Hall

    Other:
    Selected articles and/or chapters from books. Further information regarding the final list of compulsory literature will be given in class and on the course homepage/Blackboard


    Recommended reading
    Books:
    Benninga, Simon Z. and Oded H. Sarig. 1997. Corporate finance : a valuation approach. New York : McGraw-Hill
    Koller, Tim, Marc Goedhart and David Wessels. 2010. Valuation : measuring and managing the value of companies. 5th ed. Hoboken, N.J. : John Wiley and Sons Ltd. Ny utgave ventes 2010
    Penman, Stephen H. 2010. Financial statement analysis and security valuation. 4th ed. Boston : McGraw-Hill/Irwin

    Course outline
    The course is divided into five integrated parts:

    1. Business Analysis
    Business analysis is an important starting point for the analysis of financial statements. Business analysis allows the identification of the firm’s profit drivers and key risks.

    2. Quality-of-Accounting Analysis
    The purpose of quality-of-accounting analysis is to evaluate the degree to which a firm’s accounting captures its underlying business reality.

    3. Financial Statement Analysis/Credit Analysis
    The information you will find in the financial statements forms the basis of almost every valuation and credit analysis. In this part we will provide students with an understanding of how to read and interpret financial statements and notes. Our primary emphasis is on how to calculate and interpret key financial ratios and on the use of cash flow statements as an analytical tool.

    4. Forecasting
    We will use Excel to build simple models for expected future income, cash flow and financial position. These models will be used in part 5.

    5. Valuation
    We will work with different models for valuation in order to create a better understanding of their advantages and limits.

    Computer-based tools


    Course structure
    There are 36 contact hours and the course will start with lectures to create a basic understanding of how to interpret accounting information and how to use basic valuation models. At the start of the course the students will be allocated to teams consisting of 2-3 students. During the course the teams will be required to work with and to present case solutions.


    Examination
    The course grade will be based on a term paper written individually. There will also be an one hour control exam.

    Examination code(s)
    EXC 25092 - An one-hour control examination, will be jugded passed/failed.
    EXC 25093 - An individual written term paper, accounts for 100% of the final grade in the course.

    Examination support materials
    BI-approved exam calculator. TEXAS INSTRUMENTS BA II Plus™
    One bilingual dictionary may also be used at written examiniations. Support materials permitted at written examiniations are explained under exam information in our web-based Student handbook. Please note use of calculator and dictionary. http://www.bi.edu/studenthandbook/examaids

    Re-sit examination
    This course was lectured for the last time in the autumn semester of 2011. A re-sit exam will be offered every term from the autumn 2011 including the spring semester of 2013.

    Additional information

    Semester

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