I am very excited to teach this class, mainly because it focuses on what I have done my entire career, continue to do, and completely love.[1] Related, it is an opportunity to pass along what I have learned – both during my academic career and in the “real world” (as a board member in the investment management industry and as an expert witness/consultant in complex securities, valuation, taxation, and antitrust matters). I have taught related material in Booth’s EMBA program (I taught Corporate Finance/Valuation for a number of years in London and Singapore/Hong Kong before I became Deputy Dean for faculty) and in Booth’s Executive Education programs, both open enrollment and custom programs where I have worked extensively with companies on programs related to their capital management, valuation, and capital market interactions.
As the title suggests, our focus is on financial statement analysis. The goal is to make informed economic decisions that involve the use of financial statements, often in the context of capital market events such as IPOs, SEOs, M&A, PE-driven takeouts, active investing (in the Elliott Management sense), etc. This involves not only equity valuation but also making well informed lending and credit decisions (i.e., assessing financial risk, including to make sure we do a good job estimating discount rates). We will make extensive use of real-world financial statements, including cases, most of which I develop (because it’s fun; my friend Claude helps, but I have to keep an eye on him).
More specifically, my goal is to pass along to you a sense for how to use financial statement information in a rigorous and sophisticated way as part of applied economic/financial analyses. The application we will mostly study is valuation, including both discounted cash flow (DCF) methods and multiples-based approaches. You will also get exposed to important financial analysis tools, including ratio analysis, earnings quality assessment, solvency analysis.
This class will be useful to anyone who needs to make sophisticated economic decisions, including on the buy-side for active investment management (i.e., valuing public companies), as a sell-side analyst or investment banker, as a credit analyst, as a consultant, or on the corporate side, including as a CEO or CFO who needs to understand and communicate with sophisticated capital market participants.
I have indicated (in the draft sylllabus and outline) a list of likely topics we will cover, along with cases, which should give you a more specific sense for what I have in mind.
[1] To get a sense of how much fun this material can be, take a look at Alphaville in the FT, which does not sit behind a paywall, even for non-subscribers. If you already read Alphaville, you’re in the right place.
