NYU Stern School of Business

Undergraduate College

ACCT-UB.0001.001 (C10.0001): PRIN OF FINANCIAL ACCTG

Fall 2011

Instructor Details

Perkal, Dvaid

dperkal@stern.nyu.edu

MW, 11:00am to 12:30pm

KMC 10-177

 

Course Meetings

MW, 8:00am to 9:15am

Tisch T-LC21


Final Exam:

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

 

Course Description and Learning Goals

A solid foundation in the fundamentals of accounting is critical to understanding business.  The financial information that a company generates and communicates to internal and external decision-makers such as owners, managers, employees, investors, creditors, analysts and regulators is the narrative of the company. 

The first part of the course is dedicated to analyzing and constructing the three components of financial statements: the income statement, the balance sheet and the statement of cash flows.  The second part of the course is dedicated to deconstructing the balance sheet and analyzing the assets, liabilities and shareholders’ equity in greater detail.

 

Course Pre-Requisites

None.

 

Course Outline

 

9/7

Chapter 1: Accounting: The Language of Business

Homework: HSEP 34, 37 (Due 9/12)  

 

9/12 & 9/14

Chapter 2: Measuring Income to Asset Performance

Homework: HSEP 48, 49, 57 (Due 9/19)

 

9/19 & 9/21

Chapter 3: Recording Transactions

Homework: HSEP 33, 42, 52 (Due 9/26)

 

9/26

Chapter 4: Accrual Accounting and Financial Statements

Homework: HSEP 31, 39, 46 (Due 9/28)

 

9/28 & 10/5

Chapter 5: Statement of Cash Flows

Homework: HSEP 61, 70 (Due 10/12)

 

10/3

Exam 1 (Chapters 1-4)

 

10/12 & 10/19

Chapter 6: Accounting for Sales

Homework: HSEP 64, 65, 68, 76 (Due 10/24)

 

10/17

Exam 2 (Chapters 1-5)

 

10/24, 10/31 & 11/2

Chapter 7: Inventories and Cost of Goods Sold (Appendices 7A and 7B)

Homework: HSEP 56, 69, 78 (Due 11/7)

 

10/26

Exam 3 (Chapter 6)

 

11/7, 11/14 & 11/16

Chapter 8: Long-Lived Assets and Depreciation

Homework: HSEP 38, 51, 62, 69 (Due 11/21)

 

11/9

Exam 4 (Chapter 7)

 

11/21

Exam 5 (Chapter 8)

 

11/23, 11/28 & 11/30

Chapter 9: Liabilities and Interest

Homework: HSEP 62, 66, 74, 81 (Due 12/5)

 

12/5, 12/7 & 12/12  

Chapter 10: Stockholders’ Equity

Homework: HSEP 49, 52, 54, 57 (Due 12/14)

 

12/14

In-Class Group Project Presentations or Review

 

 

Required Course Materials

Horngren, Sundem, Elliott, and Philbrick (“HSEP”), Introduction to Financial Accounting, Tenth or NYU Custom Edition (Copyright 2011)

 

Assessment Components

None.

 

Group Projects

Students will form groups of four to six and select a publicly-traded company to analyze.  A list of all of the companies in the S&P 500 Index is posted on the course website to assist in your selection.  However, students should not select a financial services company to analyze as they can be difficult to navigate.  By the second week, each group will notify the professor and/or teaching assistant of the group members and company selected.  If a student is unable to form a group, he/she should notify the professor and/or teaching assistant as a group will be selected for him/her.  Each group will print the most recent 10-K of the company from www.sec.gov.  This will serve as the primary source document for the project.  On or before the last day of class, each group will submit the 10-K with the analysis based on the subject matter covered throughout the course.  Late submissions will receive a grade of zero.  Each student will receive the grade that his/her group receives for the project.  Therefore, working together as a team with each member contributing equally will be of paramount importance.  The class project is the culmination of the course.  It provides each student with the opportunity to apply the skills and analytical techniques learned throughout the course. Upon completion of the project, each student should have the confidence and ability to not only understand the financial reporting of a company, but also to formulate an educated opinion about a company.  

Below is a suggested format and content of the report which should not exceed 20 pages single spaced.  It should begin with a brief introduction of the company and conclude with an investment opinion corroborated by the qualitative and quantitative analysis.  It may be easier to initiate the analysis with the income statement, followed by either the balance sheet or statement of cash flows.             

 

Introduction:

 

Describe the company, its products and services, locations, competitive advantages, major customers, major suppliers, senior management, board of directors, auditing firm, and any major changes including acquisitions, divestitures or lawsuits.

 

Income Statement:

 

Sales: What is the revenue recognition policy? Are there returns and allowances and cash or trade discounts?  If so, what is the percentage of net sales to gross sales?  Are there credit card sales? If so, describe.  Discuss the revenue trends, i.e. increasing, decreasing or flat.

 

Expenses: Describe the expenses and discuss the margins and trends, i.e. increasing, decreasing or flat.

 

Balance Sheet:

 

Assets

 

Accounts Receivable: What is the allowance for doubtful accounts and how is it calculated?  How much is historically written off? What are the accounts receivable turnover and days to collect accounts receivable? What do they reveal about the company’s collection history?  Are any receivables factored?  If so, describe the amount and the terms of the program. 

 

Inventory: Describe the composition. Does the company use a perpetual or periodic system? Is there shrinkage?  Is there an allowance for obsolete or damaged inventory? Are there write downs of inventory? What inventory valuation method is employed? If applicable, what is the LIFO reserve and what would inventory be if FIFO were used? Calculate and interpret inventory turnover and discuss the trends, i.e. increasing, decreasing or flat.

 

Fixed Assets: Describe the composition.  What depreciation methods are employed and what are the useful lives of each asset?  What is the net book value versus original value?  Are the assets relatively new or depreciated?  Have there been any impairment charges?  If so, describe.

 

Goodwill & Intangible Assets: Describe the composition.  What is the useful life of each asset?  What is the net book value versus original value?  Have there been any impairment charges? If so, describe.

 

Deferred Tax Assets: Describe the composition.

 

Other Assets: Describe the composition such as investments and prepaid expenses.

 

Liabilities

 

Current Liabilities: Describe the composition.

 

Debt: Describe the composition.  If there are several types of debt, select two and describe the interest rates, covenants (if mentioned) and other features such as callable or convertible (if applicable).

 

Leases: Describe the capital and operating leases and the terms.

Pensions & Other Postretirement Benefits: Is the pension plan defined contribution or defined benefit? Is it over- or under-funded? Describe the other postretirement benefits (if applicable).     

 

Deferred Tax Liabilities: Describe the composition. 

 

Other Liabilities: Describe the composition such as contingent and restructuring liabilities.

 

Shareholders’ Equity:

 

Common Stock: What is the par value? How many shares are issued and outstanding?  What is the book value?  Does the company pay dividends? If so, describe the amount and dividend policy.  Did the company repurchase shares?  If so, were they retired or held in treasury stock, how many shares were repurchased and what was the cost?  If the shares were held in treasury stock, what was the intended use of those shares, e.g. to service stock options?   

 

Additional Paid-In Capital: What is the balance and how does it compare to common stock at par value?

 

Incentive Compensation:  Does the company offer stock options and restricted stock grants?  If so, describe the plans including the vesting policy. 

 

Preferred Stock(if applicable): What is the par value? How many shares are issued and outstanding?  What is the book value? What is the dividend rate?  What is the liquidating value (if mentioned)? Are there any other features such as callable or convertible?  If so, describe.  Is the company paying preferred dividends each year or are they accumulating?

 

Other Comprehensive Income: Describe the composition.

 

Statement of Cash Flows: 

 

Comment on cash flow from operating activities, cash flow from investing activities and cash flow from financing activities.  Describe the major items and their impact on each of the three sections. Describe the company’s liquidity position, i.e. does it appear to be in a strong or weak cash flow position and why?  

 

Ratios:

 

Financial Ratios: Calculate and interpret EPS, P-E, dividend-yield and dividend-payout.

 

Liquidity Ratio: Calculate and interpret the current ratio for all of the periods available. Discuss the trends, i.e. increasing, decreasing or flat.   

 

Profitability Ratios: Calculate and interpret gross profit margin, net profit margin, ROE and ROA for all of the periods available. Discuss the trends, i.e. increasing, decreasing or flat.   

 

Debt and Interest Coverage Ratios: Calculate and interpret debt-to-equity, long-term-debt-to-total-capital, debt-to-total-assets and interest coverage for all of the periods available. Discuss the trends, i.e. increasing, decreasing or flat.   

 

Valuation Metrics:  What is the stock ticker symbol and on which exchange does it trade? What is the current stock price, 52-week high and 52-week low?  Calculate and interpret book value of equity versus market value of equity and book value per share versus market value per share.

 

Conclusion:

 

Given your qualitative and quantitative analysis, would you invest in the company for either the short- or long-term? Why?

 

Grading

Homework:                    10% (1% each)

Class Project:               20%

Exams:                          40% (8% each)

Final Exam:                   30%

 

 

 

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:

 

Assignments

 

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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