NYU Stern School of Business

Undergraduate College

ACCT-UB.0003.003 (C10.0003): FIN STATEMENT ANALYSIS

Fall 2012

Instructor Details

Klein, April

aklein@stern.nyu.edu

Thursday 11-noon and Friday 12:30-1:30 PM and

K-10-93

 

Course Meetings

MW, 2:00pm to 3:15pm

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

The pre-requisites for this course are the core course in financial accounting and the core course in managerial 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.

Homework:  Read through the Target Case (do not solve).  Acquaint yourself with the financial statements and the footnotes.  If you have any questions about them, please ask them in class.

 

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 for 9/17 Class:  Handout on Changing LIFO to FIFO on Blackboard

 

In class (9/17):  ConocoPhillips vs. Exxon Mobil (on blackboard- print out and bring to class)

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

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

Print out and bring to class:  “Analysis of Warranty Accrual Reveals Margin Issues” (on Blackboard)

 

September 24 & October 1:  Pro-forma Earnings

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

Important:  Please print out and bring in the Facebook 8-K Report that is on Blackboard.  We will be discussing this in class.

For the October 1st class:  Print out and bring General Mills (on Blackboard) to class  - 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:  Print out and bring to class the handout called “SCF Problem and HW” (on Blackboard) 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:  Print out and bring to 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 and Amazon (for 2011).  Compare them to the Facebook ratios.  We will discuss them 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 Facebook, Apple, and Amazon financial statements for October 29 class.

Homework:  Relate ROA to ROCE for Apple and Amazon by using the method that we did in class for Facebook (last page of power point slide)

Important:  for the 10/31 class, print out and bring in the  Lehman Brothers Case as well as the quarterly and annual statements (all on Blackboard):  This is a great illustration of why Lehman went bust.

Practice Problem:  Chemical Industries (on blackboard)

 

November 5 & 7:  Risk Analysis

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

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

Important:  Please print out and bring 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.  Note there are two sets of power point slides for these lectures.

 

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

                       For those interested in all of the nuts and bolts, http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/USEng/Documents/Deloitte%20Periodicals/Roadmap%20Series/Roadmap_AccountingForIncomeTaxes.pdf is a handy guide. It is way beyond what we will do in this class, however.

            Important:  For the November 28th class, please print out and bring in the Home Depot case as we will be going over that in class.

            Homework:  Amazon Income Tax Case (on blackboard)

 

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

Read: Power Point Slides; http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/lease.htm;

The next two items are FYI only

http://www.fasb.org/cs/BlobServer?blobkey=id&blobwhere=1175823559205&blobheader=application%2Fpdf&blobcol=urldata&blobtable=MungoBlobs (exposure draft on virtually eliminating operating lease accounting)

http://www.accountingtoday.com/news/Congressmen-Urge-FASB-Reconsider-Lease-Accounting-Changes-62744-1.html (a news story)

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

            Homework:  Facebook – use the 10-K 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       

            Important:  Print out and bring the: General Electric Case (on blackboard) to class on December 10th.

 

December 12:  Review for Final

 

Final Exam:  December 17

             9:30 Class is from 8 AM – 9:50 AM

            11:00 Class is from 10 AM – 11:50 AM

              2:00 Class is from 2 PM – 3:50 PM

 

Required Course Materials

 

 

Important!!!

 

 

Assessment Components

Grading will be based on the following weights:

 

Midterm 1                                           20%

Midterm 2                                           20%

Midterm 3                                           20%

Final Exam                                          40%

 

Grading

See above.

 

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.

 

Professional Responsibilities For This Course

Attendance

 

Participation

In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:

 

Missing a midterm

 

Classroom Norms

 

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. 

 

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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