NYU Stern School of Business

Undergraduate College

ACCT-UB.0003.002 (C10.0003): FIN STATEMENT ANALYSIS

Fall 2012

Instructor Details

Klein, April

aklein@stern.nyu.edu

212-998-0014

Tuesday 11-12; Friday 12:30-1:30 and by appoi

K-MEC 10-93

 

Course Meetings

MW, 11:00am to 12:15pm

KMC 4-120


Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:

 

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 5:  Introduction to Course:  What is Financial Statement Analysis?

 

Learning Objectives:

  1. Overview of financial reporting and financial statement analysis
  2. Understand most effective means of mastering course

 

 

September 10:  Overview of Financial Reporting

 

Read: I hope you kept your financial accounting book.  Peruse through this book and remind yourself how the accounting system works and how the financial statements look like.

 

In class:  Target Case (on blackboard).

 

September 12 & 17  Balance Sheet Analysis – Asset Analysis

 

            For September 12 class, print out the “Groupon financial statements” from its 2011 10-K report..  It’s on blackboard.  I also put up the entire filing for your perusal.

 

            For September 12 class, print out the “Facebook financial statements” from its S-1 IPO filing.  It’s on blackboard.  I also put up the entire filing for your perusal.

 

Read:  Handout on Changing LIFO to FIFO

 

In class (9/17):  ConocoPhillips vs. Exxon Mobil (on blackboard)

 

See blackboard for an additional  LIFO-FIFO problem which you might find useful to do.

 

Make-up class:  For those who cannot attend the 9/17 class for religious reasons, I have scheduled a make-up class on September 21.

 

September 19:  Income Statement Analysis

 

            Read:  “Analysis of Warranty Accruals Reveals Margin Issues” (on blackboard).

 

            We’ll be looking at Facebook, Groupon and Apple in this class.  You should bring in the income statements for all three companies.

 

September 24 & October 1:  Pro-forma Earnings

 

Note:  there will be no class on September 26 due to Yom Kippur. 

 

In class (10/1):  General Mills (on blackboard)  - I strongly suggest you give this a shot as it is difficult to do otherwise.

 

October 3:  Midterm 1

 

 

October  8 & 10  & 17  Statement of Cash Flows

 

            October 8 & 10 Creating a Statement of Cash Flows 

 

Important:  Bring in the handout called “SCF Problem and HW” for the October 8 & 10 classes

                                 

             Homework:  Do the SCF for 2012 in the hand-out.

 

             October 17:  Patterns of Cash Flows & Analyzing SCF

                                                                     

 Important:  Bring in the handout called “Packet of Cash Flow Statements” for the October 17 class.

 

 

October 22:  Midterm 2

 

 

October   24 & 29 & 31  Profitability Analysis - Using ROA and ROCE

           

           

            October 24:  ROA and its Components

 

            Read:  http://en.wikipedia.org/wiki/Financial_ratio; the one exception is ROA in which the numerator should read [Net Income from Continuing Operations + (1-T)*Interest Expense + Minority Interest Earnings].  Use this for the ROA DuPont equation as well.

 

Due on October 24:  Calculate the ROA, the Dupont disaggregation of ROA into profit margin and asset turnover ratio, A/R turnover ratio (and in days) and the fixed asset turnover ratio for Facebook.  We will use them to compare them to Starbucks in class.

 

Homework:  Calculate the same ratios for Apple computer (for 2011).  Compare them to the Facebook ratios.  We will discuss this in class on October 29.

 

 

October 29:  ROCE and relatingROA to ROCE

 

Due on October 29:  Calculate the ROCE and the Dupont disaggregation of ROCE into adjusted profit margin, asset turnover and leverage for Facebook.  We will use them in class on October 29. 

 

Bring in your statements for Facebook, Apple, and Amazon for October 29 class.

 

Homework:  Relate ROA to ROCE by using the method that we did in class for Facebook.

 

In class (10/31):  Lehman Brothers Case:  This is a different disaggregation and a great illustration of why Lehman went bust.

 

Practice Problem:  Chemical Industries (on blackboard) – not a hand-in

 

 

November 5 & 7:  Risk Analysis

 

            Read:  http://en.wikipedia.org/wiki/Financial_ratio;

 

            In class (both classes):  Clorox (on blackboard)

 

Bring in the handouts on Clorox 2008 and Clorox 2010 to class.  We will be using them during these two classes.

 

Practice Problem:  Chemical Industry (on blackboard)

 

November 12 & 14:  Equity Analysis

 

No reading or homework assignment.

 

 

November 19:  Midterm 3

 

_____________________________________________________________________

November  21:  Lecture on Hedge Fund Activism: Current Research and Statistics

 

            See Blackboard for the papers that we will discuss

 

November 26 & 28:  Income Taxes 

 

            Read; Power Point slides from class

 

            In class (11/26):  Home Depot – due on November 28

 

            Homework:  Amazon Income Statement Case (on blackboard)

 

 

December 3:   Assets and Liabilities On and Off-Balance Sheet:  Operating and Capital  Leases

 

Read: Power Point Slides

 

In Class:  We will be putting the operating leases of Ruby Tuesday back on balance sheet.

           

            Homework:  Facebook – use the financial statements and fill in the boxes in your

            power point slides

 

 

December 5 & 10:  Introduction to Pensions and Post-Retirement Benefits 

 

Read:  Handout on Pension Terms;              http://teachmeaccounting.blogspot.com/2010/01/pension-accounting.htmlis a good, succinct handout on SFAS 158

          

            Homework: General Electric Case (on blackboard)

 

 

December 12:  Review for Final

 

Final Exam:  TBA

 

 

 

Required Course Materials

 

Assessment Components

 

Grading

Grading will be based on the following weights:

 

Midterm 1                                           20%

Midterm 2                                           20%

Midterm 3                                           20%

Final Exam                                          40%

 

 

Blackboard

I will be using Blackboard to post notes, the syllabus, and to communicate with you throughout the term.  If you have any questions as to how to use Blackboard, please see me after class.

 

Seating Chart

I will be using a seating chart to get to know your names.  I will bring the chart to class on September 21, so please select your seat on that date.  You must remain in that seat for the entire class – unless you expressedly ask me for a changed seat.

 

Course Policies

Attendance

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. 

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 Crackberries.

 

Stern Honor Code

You must abide by the Stern honor code.  That means, among other things, that you must hand in your own work, not copy anyone else’s work, and not hand in anyone’s homework assignments.

 

 

 


 

 

Group Projects

Assignments

 

 

 

 

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

 

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:

 

Assignments

 

Classroom Norms

             I am sorry, but I do not allow students to use computers in class.  Please put them away.

             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:

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.

 

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