Teaching starts Autumn

Language of instruction English

Learning outcomes After taking the course the students should be able to understand: How to analyze historical performance, including reorganizing a company´s financial statements to reflect economic performance How to forecast performance by preparing business forecasts/pro forma financial statements. How fundamental value is estimated How fundamentals such as dividends, cash flows, earnings and equity book value are used in valuation How to interpret the results of valuation in light of a company´s competitive situation and analyze how business strategies add value How to link a company´s valuation multiples, such as the price/earnings ratio and the price-to-book ratio, to the core drivers of its performance How to analyze equity risk and credit risk from financial statements How to trade on fundamental information

Course contents Investors turn to financial statement analysis to get an indication of the underlying value of firms. They want to know what firms are worth so they can ascertain at what price to trade. This course shows how the underlying value of firms can be estimated. Underlying value is sometimes referred to as fundamental value, and the analysis of information about fundamental value is referred to as fundamental analysis. The course lays out the techniques of sound fundamental analysis. This course integrates concepts from finance and accounting courses. The course combines accounting concepts with finance concepts by integrating financial statement analysis and fundamental analysis. Specifically, it shows how the structure of accounting can be exploited for valuation purposes. While traditional finance courses view investors as relatively passive, accepting prices as fair value, this course takes an activist´s perspective. Instead of assuming that "the market is efficient", the active investors challenge the market price with fundamental analysis, checking whether that price is a fair price. Active investors exploit what is perceived to be mispricing in the market to earn superior returns. The primary focus of the course is on earnings forecasting and methods for converting forecasts to a valuation. While valuation texts often use discounted cash flow analysis to value enterprises, analysts typically forecast earnings to indicate business value. Earnings, appropriately measured, give a better indication of the value generating process of an enterprise. The course shows how the analysis of earnings prospects leads to a firmer understanding of fundamental value. As earnings differ from cash flow because of accrual accounting, the course lays out how accruals can help in understanding a business and its value. The course builds on undergraduate courses in finance theory and accounting.

Teaching methods Lectures and group work, 4-5 hours a week.

Examination requirement Passing grade on written assignments prior to exam. Further information will be given in Fronter.

Assessment methods and criteria 4-hour written examination. Differentiated grades.

Type of course Theoretical

Level of course Graduate

Year of study Normally fourth year

Name of lecturer/contact person Head of Department Andrè Tofteland

Mode of delivery Face-to-face