Course Meeting Times
Lectures: 2 sessions / week, 1.5 hours / session
Primary Objective
Advance your understanding of how to use financial information to Value and Analyze firms. We will apply your economics/accounting/finance skills to problems from today's business news to help us understand What is contained in financial reports, Why firms report certain information, and How to be a sophisticated user of this information.
Why?
Provide up-to-date applied knowledge of fundamental valuation techniques, the pitfalls of accounting reports, and how to "read between-the-lines" of financial statements. This will be very useful for your career as a financial analyst, investment banker, consultant, corporate director, etc. We will discuss up-to-date and "hot" topics that companies face today. This information will be extremely useful for your job interviews and your future job.
Coursepack
Contains select chapters from a variety of new Financial Statement textbooks. Basically, I have extracted the best chapters from each textbook and created a customized text with the most up-to-date information for this course. In addition, I will provide handouts and lecture notes before each class. These notes will be accessible through the class server prior to each class. If you are missing material for a particular class, please obtain them from the Web to make sure you do not fall behind.
Recommended Textbook
To supplement the "customized" coursepack materials, you may wish to purchase the following supplemental reference text on investment valuation: Investment Valuation: Tools & Techniques for Determining the Value of Any Asset, 2nd edition by Damodaran, 2002.
Preparation for Class
Short reading assignments from the text, coursepack, and class handouts will be provided at the end of each class. The necessary readings for the next class will be listed in the current class handouts. We will not cover every part of each chapter in the coursepack and textbook! Therefore, concentrate your efforts on the short assigned readings.
Grading
| HOMEWORK | POINTS |
|---|---|
| 3 Homework "Case" Assignments (count best 2) | 50 pts |
| 2 Quizzes (in class) | 200 pts |
| Analyst Reports/Presentation (Team) | 150 pts |
| Due Diligence Report/Presentation (Team) | 50 pts |
| Class Contribution (Participation/Other) | 50 pts |
| Total | 500 pts |
Homework "Case" Assignments
Three short applied homework assignments will be assigned about 1 week before each due date. You may work alone or in a team of up to 4 students. You must submit your analysis to the assignment at the start of class on the due date. Be prepared to discuss and defend your analysis during the class discussion on the due date!
Quizzes
This class has no final exam. There will be two in-class quizzes during the semester that will be approximately 50 minutes in length. These quizzes will test your understanding of the core material. I will hold an informal and optimal review session the day before each quiz (time and location will be announced).
Valuation and Accounting Analysis Project
Student teams (up to 4 students) will be responsible for performing a complete analysis and valuation of a company of your choice during the semester. The project will be due in 2 parts during the semester. In addition, each team will be required to present one of the two parts of their project during the semester.
Instructions for Team Project
This comprehensive analysis will be similar to the new format of Wall Street analyst reports.
Guidelines for company picks:
- I recommend that you avoid analyzing a bank, insurance company, or any other type of financial institution.
- I suggest you pick a company that has at least 5 years of historical financial statements and stock market information (returns).
- Foreign companies are welcome, but they are often more challenging to analyze. But, you are welcome to go for it!
- The company must not have been evaluated by prior MIT students in 15.535 in 2001-2002 (Fall or Spring semesters).
- I will provide additional guidance on the form and content of the projects throughout the semester.
Due Dates
Thursday, February 13 (in class): Submit team member names and identify your 1st, 2nd and 3rd choices for the company you wish to analyze. I will e-mail you to confirm the final company you will be assigned to analyze for the semester.
Friday, March 7: Project Part 1 - "Cash flow projections and earnings quality analysis". All teams must e-mail their completed report for part 1 of the project to both me and to the team who will perform the due diligence by 5:00 pm on Friday, March 7.
Tuesday, March 11 and Thursday, March 13: Half the teams in the class will present their analysis to the class on these dates. In addition, half the "due diligence" teams will be required to present their due diligence of the matching company reports/presentations.
Friday, May 9: Project Part 2 - "Company valuation and risk assessment". All teams must e-mail their completed report for both part 1 and part 2 of the project to both me and to the team who will perform the due diligence by 5:00 pm on Friday, May 9.
Tuesday, May 13 and Thursday, May 15: The remaining half of the teams in the class will present their analysis to the class on these dates. In addition, the remaining half of the "due diligence" teams will be required to present their due diligence of the matching company reports.
Due Diligence on Projects
In addition to your own project, you will be required to write up a 1-2 page due diligence report on both parts of another team's project. Notes:
- You will be matched with another team that is analyzing a company in the same industry as your own team's company. Therefore, you will have substantial expertise in evaluating the work of the other team.
- You will present a summary of your due diligence in class once during the semester after the other team presents their analysis. However, you must submit due diligence reports on both parts of the other team's project.
- You will receive an e-mail copy of the other team's project (Part I and Part II) 4 days prior to the presentations. You must submit a hardcopy of your due diligence report to the other team and to me on the presentation dates (even if your team is not presenting a due diligence report in class for that part of the analysis.)
Classroom Approach
The classes will be casual, fun and informal. I think the best way to learn is through numerous examples. Therefore, we will examine many interesting "cases" from the today's financial press on topics of current importance. To keep things lively, I will ask questions and get your input during class. My questions are not intended to put you on the spot … I am a very easygoing and forgiving person!