RSM2212
Business Analysis and Valuation
Partha Mohanram
TARGET AUDIENCE
This course is targeted towards students pursuing a career where one needs to analyze financial statements
“intelligently.” This obviously includes those interested in finance related professions such as Investment
Banking, Research and Investment Management. Students interested in consulting and marketing also find
this course useful because of its approach that focuses on business analysis with tie-ins to corporate
strategy.
COURSE MISSION
This course will help you value businesses using financial statements. We will discuss how accounting
regulations and managerial discretion influence presented financial statements. You will understand how
to interpret financial statements, analyze cash flows, make judgments about earnings quality and uncover
hidden assets and liabilities. You will also be exposed to research from accounting and finance that focuses
on how financial statement analysis can be used in devising trading rules. Finally, we will use financial
statement analysis prospectively to forecast and value firms using cash flow based and accounting based
methods.
COURSE SCOPE
The course will consist of the following five modules. In the first module (strategic and industry analysis) you
will learn why the critical first step is to understand industry structure and a company’s strategic choices.
The second module (accounting analysis) will provide you with a framework to understand and evaluate
a firm’s accounting and disclosure choices and learn how to adjust financial statements to ensure better
comparability. The third module (financial analysis) will present a comprehensive framework for ratio
analysis where a firm’s operations are separated from its financing to better understand the true drivers of
profitability and risk. The fourth module (prospective analysis) will expose you to techniques of integrated
forecasting, where you will apply the insights from the earlier modules and apply them to truly understand
what the future holds for the firm being analyzed. You will then use these forecasts to value firms using a
variety of techniques including multiples and abnormal earnings based valuation methods. In the fifth
module, you will apply the business valuation techniques in a variety of settings including credit analysis
and M&A.
Readings
AVAILABLE on Course Webpage: Presentations for class, Excel Spreadsheets, Links to Articles from Business
Press, Additional readings. There will be no additional course packet as all material will be made available
online.
REQUIRED BOOK: There is no required or recommended book for the course. If you wish, you may use any
financial statement analysis and valuation textbook as a supplementary reference.
Evaluation and Grades
Component
Due Date
Weight
4 Individual HW
Due In Class
25%
Class Participation
Ongoing
15%
Group Project
Due at End of Course
30%
Final Exam
TBD
30%
