BE-414 Financial Statement Analysis and Equity Valuation (Autumn 2022)

• analyze historical performance, including reorganizing a company´s financial statements to reflect economic performance
• forecast performance by preparing business forecasts/pro forma financial statements
• use simple valuation techniques such as asset based valuation and the method of comparables
• demonstrate how financial statements prepared in accordance with internationally accepted accounting standards are used in valuation
• apply fundamentals such as dividends, cash flows, earnings and equity book value to compute equity value/company value
• analyze and provide evidence that the fundamental valuation models in general are identical
• provide evidence that company value is unaffected of the accounting methods employed
• link a company's valuation multiples, such as price/earnings ratio and price--book ratio, to the core drivers of its performance
• trade on fundamental information
• demonstrate how preferences for sustainable investment choices can affect investors’ stock composition and discuss possible relations between the United Nations’ Sustainability Development Goals, in particular SDG 12, and investment choices.

This course will examine how the underlying (or theoretically "correct") value of firms can be estimated. The course integrates the learning from finance and accounting courses. 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. Active investors exploit what is perceived to be mispricing in the market to earn superior returns.

The course's primary focus 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

4-hour written examination with letter grades.

Due to grade requirements for state authorised auditors, a regular examination will be held both autumn and spring.