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Instructor Details
Klein, April
212-998-0014
Tuesday 11-12; Friday 12:30-1:30 and by appoi
K-MEC 10-93
Course Meetings
MW, 9:30am to 10:45am
Tisch T-201
Final Exam: December 20: 8 AM - 9:50 AM. It is cumulative, with an emphasis on the material after the midterm.
Course Description and Learning Goals
This course is designed to prepare you to interpret and analyze financial statements effectively. This course explores in greater depth financial reporting topics introduced in the core course in financial accounting and also examines additional topics not covered in that course. The viewpoint is that of the user of financial statements. This course is designed primarily for students who expect to be intensive users of financial statements as part of their professional responsibilities.
Course Pre-Requisites
Core Course in Financial Accounting
Course Outline
September 8: Introduction to Course: What is Financial Statement Analysis
Learning Objectives:
- Overview of financial reporting and financial statement analysis
- Understand most effective means of mastering course
September 13 Preliminary Analysis of Target and What is a Conference Call?
Read Chapter1: pp. 1-17
Skim through the Target 2009 Annual Report (on blackboard), including the. CEO’s letter to shareholders. Look at the risk factors in Item 1A of the Annual Report. Read through the transcript of the xx Target Corporation Earnings Conference Call (on blackboard). Go into auditintegrity.com and get the AGR for Target (TGT).
Preparation Hand-in 1: Target is part of the discount variety stores industry. For this industry, do an economic attribute analysis along the lines of Exhibit 1.8 in your book. Add in other items, as necessary. In addition, name two direct competitors of Target. See Template on Blackboard.
Preparation Hand-In 2: Write up a one-page recommendation on Target Corporation. In it, place on top whether you would recommend a buy, hold or sell on the stock. Defend your choice with three pieces of information (show sources and computations, if necessary). Under that, place at least one piece of contradictory or cautionary evidence (show source(s) and computations, if necessary).
September 15: Overview of Financial Reporting
Read: Chapter 1: pp. 17-41: Bring in the Target Annual report
Preparation Hand-In 3: Target Case (on blackboard). We will go over this in class.
September 20: Tools 1 and 2: Common Size Statements and Percentage Changes
Read: Chapter 1: pp. 42-49
Homework: Problem 1.11 (I would like you to do this problem in a group of 4-5 students. We will begin in class. The group(s) with the highest number of correct answers will get a +1 on their Class Preparation Score for the term.)
September 22 & 27 & 29 & October 4 Tool 3: Statement of Cash Flows
September 22 & 27 Creating a Statement of Cash Flows
Read Chapter 3: 164-194. Make sure you can do exhibits 3.14, 3.15 and 3.16.
In class: We will go over problem 3.25 in class. Not a hand-in.
Homework: 3.24. Not a hand-in
September 29: Patterns of Cash Flows
Read Chapter 3: 155-164
Preparation Hand-In 4: Problems 3.11-3.13. We will go over these in class.
In class: we will go over Target’ SCF, Coca-Cola (3.15), Sirius XM Radio (3.18), Sunbeam (3.19), and Montgomery Ward (3.20)
October 4: Preparation Hand-In 5: Case 3.3 (W.T. Grant): See Blackboard for help on how to do this case.
October 6 & 13 & 18: Tool 4: Profitability Analysis - Using ROA and ROCE
October 6: ROA and its Components
Read: Chapter 4 (pp. 259-261; 266-295) In your reading of this chapter, please ignore the discussion on the adjustments made to the income and ROA. This discussion is beyond what we will cover (at least at this point in the semester).
October 6: Preparation Hand-In 6 - Problem 4.10. After class, I will post the answers on blackboard. I will assume for these two classes that you can do the computations to derive the components.
In class: we will do an ROA analysis for Target. Please calculate ROA, profit margin and asset turnover ratios for 2009 and 2008 prior to class (not a hand-in).
Homework: Problems 4.15 – 4.19. If you have any questions on these problems, ask them in class.
October 13: ROCE and relating ROA to ROCE
Read: Chapter 4: pp. 295-308
October 13: Preparation Hand-In 7 - Problem 4.11. After class, I will post the answers on blackboard. I will assume that you can do the computations to derive the components.
In class: We will break up Target’s ROCE into its components in class. Please calculate the ROCE as well as the separate components. See pages 301 and 299 for the components.
I
October 18: We will do the Lehman Brothers Case (on blackboard) in class. It is not a hand-in but you might want to calculate the ROAs and ROCEs that we will be discussing.
October 20: Review for Midterm
October 25: Midterm
October 27: Forecasting Future Earnings – Using our Tools to Forecast Future Earnings
Read: Power Point Slides for Class
Homework: Do forecasts for year +2 for Target
November 1: Tool 6 Risk Analysis – Using Ratios and Comparisons Among Statements
Read: Chapter 5 (pp. 361-380)
Preparation Hand-In 8: Problem 5.13
In class: We will re-visit Case 3.3 (W.T. Grant)
November 3 & 8: Tool 8: Pro-forma Earnings
Read: Chapter 9: Read this chapter to understand why we exclude certain types of income. This chapter is a little wordy for my taste, but bear with it.
November 8: We will go over problem 9.9 in class. Not a hand-in.
Homework: Problem 9.10
November 10: Asset Analysis
Read: Pages 538-539; 653-655
Homework: Problems 7.15 (a and b only); 8.21
November 15 & 17 & 22: Group Presentations (3 Groups on Each Day)
November 24: Last Group Presentation (if necessary) plus Problem Session
We will go over a few review problems during this class. Bring in your book.
November 29: Assets and Liabilities On and Off-Balance Sheet: Operating and Capital Leases
Read: Chapter 6 (pp. 459-464; 484-493) - don’t worry about the journal entries for the capital leases – we will be concentrating on pp. 490-492.
Preparation Hand-In 9: Blackboard assignment
In class: Problem 6.20
Homework: Case 6.1 Starbucks
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December 1 & 6: Income Taxes
Read; Chapter 8 (pp, 661-672)
December 1: Preparation Hand-In 10:
- Define the following terms: Current Income Taxes, Income Tax Expense, Income Tax Provision, Effective Tax Rate
- Why is current income taxes not equal to the income tax expense?
December 8: Introduction to Pensions
Read: Chapter 8 (pp. 672-684)
Preparation Hand-In 11: Problem 8.13, parts a-c only.
Homework: Problem 8.22, parts a and b only
December 13: Analysis of Firm: Outside speaker will come to class
One page group hand-in on firm is due
December 15: Review for Exam 2
Final Exam: December 20 (8AM-9:50 AM)
Required Course Materials
1. There will be a customized version of Finanical Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, 7th edition, by James M. Wahlen, Stephen P. Baginski, and Mark T. Bradshaw that will be available for sale in the bookstore.
2. We also will be using the Target 2009 annual report during class. It will be on blackboard.
3. There will be other items posted on blackboard.
Assessment Components
Grading will be based on the following weights:
Class Preparation** 10%
Midterm 25%
Group Oral Presentation 15%
Individual Firm Analysis 5%
Group Hand-In for End of Year Firm Analysis 5%
Final Exam 40%
* Class preparation are the 11 Hand-Ins that are due throughout the syllabus. No late assignments will be accepted nor will I accept e-mailed or faxed assignments. All hand-ins are due on the day of the class as indicated in the syllabus.
Group Projects
You will self-select yourselves into groups of 5 or 6 in class on September 27. In total, I would like to see 9 groups (based on class size). On October 4, each group will choose an industry to analyze, for example, fast food or women’s clothes. Each person in the group will choose his/her own firm in the industry. Your group will present orally a 20 minute industry analysis using the firms in your industry, followed by 5 minutes of Q &A. The 20 minutes will be strictly adhered to – like the NFL football draft, you will be on the clock and cut-off after the 15 minutes.
On October 4, each group also will choose the presentation date (tie breakers will be decided in class). There will be three presentation dates: November 15 & 17 & 22.
The analysis should cover the relevant topics discussed up to the presentation date. You are to summarize the economics and current conditions in the industry and each firm in your industry. Describe the strategies each of the firm pursues, perform a profitability and risk analysis, a cash flow statement analysis, and talk about any other relevant items. The oral presentation will be accompanied by either your power point slides or a 5-10 page report. Each person will attach a 1-2 page analysis of his/her firm including tables and graphics – attached to that put the firm’s most recent financial statements.
More details of the project will be given as the semester progresses.
Timetable
Select group of 5-6 in class September 27
Select industry and firms October 4
Select presentation date October 4
Guidelines for Group Projects
Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.
Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for the entire group presentation. The group project will be graded as a whole: Your individual firm analysis will be graded separately. The group project contributes 15% towards your final grade. The firm analysis contributes 5% towards your final grade.
It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.
You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading. If there is consensus that a group member contributed more than his/her fair share of work to the project, I will consider this feedback during grading.
Grading
At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter. Assigning grades that reward excellence and reflect differences in performance is important to ensuring the integrity of our curriculum.
In general, students in this elective course can expect a grading distribution where about 50% of students will receive A’s for excellent work and the remainder will receive B’s for good or very good work. In the event that a student performs only adequately or below, he or she can expect to receive a C or lower.
Note that the actual distribution for this course and your own grade will depend upon how well each of you actually performs in this course.
Re-Grading
The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.
If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.
Crossed out responses or erasures will not be considered.
Professional Responsibilities For This Course
Attendance
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I do not take attendance. However, under the guidelines of the Stern School, class attendance is part of a student’s grade. If you miss a class, it is your responsibility to make it up.
Participation
In-class contribution is an important part of our shared learning experience. You can excel in this area if you come to class on time and contribute to the course by:
- Providing strong evidence of having thought through the material.
- Advancing the discussion by contributing insightful comments and questions.
- Listening attentively in class.
- Demonstrating interest in your peers' comments, questions, and presentations.
- Giving constructive feedback to your peers when appropriate.
Assignments
- Late assignments will not be accepted or will incur a grade penalty unless due to documented serious illness or family emergency. Exceptions to this policy for reasons of religious observance or civic obligation will only be made available when the assignment cannot reasonably be completed prior to the due date and you make arrangements for late submission in advance.
Classroom Norms
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Late Arrivals
I would appreciate it if you could arrive in class on time. If you are late, please enter the class w/o disrupting the other students. Similarly, if you need to leave class early, please do it as quietly and inconspicuously as possible.
- Computers in Class
I am sorry, but I do not allow students to use computers in class. Please put them away.
- Cell Phones and Text Messaging
Unless you are expecting an urgent message, please turn off your cell phones and other electronic devices. And NO TEXTING in class.
Stern Policies
General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior. Students who fail to do so may be asked to leave the classroom.
Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. You may work in groups to discuss homework assignments. However, each person should prepare his/her own individual homework solutions to be submitted. Ideally, you should work through each day’s assignment on your own before discussing it with anyone. You can then make changes to your solution based on your learning in any discussion. Interpretations of the analysis should be in your own words.
Course Evaluations
Course evaluations are important to us and to students who come after you. Please complete them thoughtfully.
Academic Integrity
Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:
- Exercise integrity in all aspects of one's academic work including, but not limited to, the preparation and completion of exams, papers and all other course requirements by not engaging in any method or means that provides an unfair advantage.
- Clearly acknowledge the work and efforts of others when submitting written work as one’s own. Ideas, data, direct quotations (which should be designated with quotation marks), paraphrasing, creative expression, or any other incorporation of the work of others should be fully referenced.
- Refrain from behaving in ways that knowingly support, assist, or in any way attempt to enable another person to engage in any violation of the Code of Conduct. Our support also includes reporting any observed violations of this Code of Conduct or other School and University policies that are deemed to adversely affect the NYU Stern community.
The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:
Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505
To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin. Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications. Additionally, your document will become part of the Turnitin database.
Recording of Classes
Your class may be recorded for educational purposes
Students with Disabilities
If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend. If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.
