University of Southern California



Faculty: James (Jim) Leonetti, CPA (inactive)

Office location: TBD

Email: Leonetti@usc.edu or Leonetti@marshall.usc.edu

Communication: Blackboard and/or Marshall email

Office Hours: Tuesday 2:00pm – 5:30 p.m. or by appointment

Text Book Financial Statement Analysis by K.R. Subramanyam and J. Wild, (11th edition, 2014)

Prerequisites: GSBA 510

Course Description and Learning Objectives

This course is focused on increasing the student’s understanding over how to utilize and effectively analyze the information from financial statements and financial reporting for the purpose of conducting professional financial analysis. An important objective of this course is to provide the student with practical tools and understanding to successful perform financial statement analysis as a professional analysis.

We will explore how to use financial statement information to evaluate the firm’s past , economics and how to use additional information, such as footnote disclosures, earnings releases, analyst calls, annual report to shareholders and the reporting to the SEC to better understand and analyze financial statement information.

Upon completion of the course, students should have learned and demonstrated the following skills:

1. Demonstrate presentation skills that will enable you to present financial analysis in a succinct and effective manner

2. Compute the most commonly used ratios and use them in analysis.

3. Understand where critical data may be located in publicly distributed materials of a Company.

4. Understand management’s objectives relating to F/S, 10-k, annual report, proxy, press release and earnings calls.

5. Understand key Non-GAAP measures and ratios and why these are sometimes preferred over GAAP measures.

6. Review one-time items and special items.

7. Demonstrate leadership and team skills.

An important course objective is for students to work as part of a team and to prepare and participate in both written and oral group presentations.

Graduate Programs Student Learning Outcomes

The five Student Learning Outcomes developed for this program by the USC Leventhal faculty and administration and filed with the AACSB, the accrediting body for accounting and business schools are shown below. This course will deal primarily with outcome 1 and to a lesser extent with outcomes 2 through 5.

1. Technical, Conceptual, Problem-Solving Requirement

Students will be competent in and be able to apply discipline-specific knowledge and skills in the fields of accounting or taxation. This learning outcome includes the development of critical thinking and problem solving skills, as well as an understanding of the strategic role of accounting in business organizations and society.

2. Professional Development Requirement

Students will be able to communicate clearly, and strategically, after considering the relevant audience, situation and purpose of the communication. Students will develop the ability to work productively with others to accomplish established goals.

3. Research/Life-Long Learning Requirement

Students will be able to use relevant research databases and academic/professional literature to gain new knowledge and analyze business situations.

4. Ethical Principles and Professional Standards Requirement

Students will be able to apply ethical principles and professional standards in analyzing situations and making informed decisions.

5. Globalization Requirement

Students will be able to demonstrate an international perspective and appreciation for diversity and cultural differences, along with their significance in global business.

Grading Standards and Graded Elements

I intend to adhere to the USC Leventhal School of Accounting and Marshall School of Business grading standards for graduate programs. In general, final course grades at the graduate level in a core course average approximately B+ (3.3), but may vary based on class performance. For elective courses, the class average is usually higher--approximating 3.5, which is between a B+ and an A-. You must receive a C or better to pass a required class, and you must have an overall B average (3.0 minimum) in order to graduate from USC. The graded elements of this course are listed in this syllabus along with information about how they will be evaluated.

It my general expectation that the grades for this class will be earned based upon the approximate percentages of the total scaled points listed below:

• Grade of an A to an A- earned for achieving between 100%-89% of the scaled points awarded.

• Grade of a B+ to a B- earned for achieving between 88%-77% of the scaled points awarded

• Grade of a C+ to a C earned for achieving between 76%- 66% of the scaled points awarded

• Grade of a D or worse for achieving lower than 65% of the scaled points awarded

Grading elements

The breakdown of the graded elements for this course is listed below:

Weekly Team Case Assignments 15%

Individual Homework Assignments 10%

Class participation and professionalism 5%

Midterm exam 25%

Final exam 30%

Semester Team Project 15%

100%

Evaluation of Graded Elements

Listed below is more in-depth description of the various graded elements.

Weekly Team Case Assignments (15% of Grade)

On the first day of class, teams will be formed and each team will select a Company that they will perform both weekly case studies and a semester project. Most weeks there will be a team assignment due from each team. The weekly team assignments will be graded on thoughtfulness, the quality of the classroom presentation, effectiveness of underlying rationale, and general quality of the written presentation. The team assignments are due prior to the beginning of class and a hard copy should be turned in to me. Teams will then have the opportunity to briefly present their case to the class. It is expected that the oral presentations to the class should be brief and the time allowed for the oral presentation will be discussed during the class prior to the time each presentation is due. It is important for the oral presentations to stay within the allotted time so that each team can have an equal opportunity to present their case. Each student will prepare two peer evaluations for all members of their respective team. There will be two peer evaluations and they will be due on the day of the Mid-term and on the day of the Final Exam.

Individual Homework Assignments (10% of Grade)

There will be individual homework assignments throughout the semester. The primary purpose of these assignments is to help the students to focus on key concepts or issues and to demonstrate their individual learning of these concepts. The individual homework assignments will be graded on completeness, professionalism and thoughtfulness. The homework assignments should be succinct and turned in on a hard copy, at the beginning of the class session when they are due. If you know that you will miss a class and want homework credit for the assignments due for that class, please email the homework to me prior to that class. No late homework materials will be accepted.

Class Participation and Professionalism (5% of Grade)

Class participation will be graded based on active, constructive, and positive participation in class. The evaluation of class participation will look for high quality participation that reflects both advance preparation as well as consistent participation throughout the semester. It is hoped that there will be widespread participation all class members and an atmosphere where students will positively and actively contribute to the learning environment.

Midterm (25% of Grade) and Final Exam (30% of Grade)

The midterm exam will be held on Tuesday October 11, 2016 at 6:30 pm in our regular classroom and the final exam will be held on Tuesday, December 13, 2016 at 7:00 pm., at a location that is to be determined. Both exams are cumulative and comprehensive and are to be completed individually. These exams may include materials covered in class lectures, assigned in required readings, and also from discussions presented during the weekly team case assignments. There are no scheduled make-up exams for the final exam or the midterm. If you have a known schedule conflict for either exam, please discuss it with me immediately. Additionally, if an illness or unforeseen emergency arises, you must contact me as soon as possible so that we can discuss.

Team Semester Project (15%)

As previously noted, each student will join a team on day 1 of the class. On day 1, each team will select a Company that they will perform both weekly case studies and a Team Semester Project. The company selected by each team will be referred in the class and in the syllabus as that team’s Selected Company. The Team Semester Project will consist of each team analyzing no less than one and no more than three competitors (or other companies that operate in a similar industry space) as their Selected Company ( these competitors are referred to as the “Selected Competitors”). The Team Semester Project is due on November 29. This is also the date that each team will make its oral presentations. The Team Semester Project will consist of each team preparing the following:

• A detailed financial analysis of the Selected Company and the Selected Competitors and making a comparative financial analysis of the Company against its competitors and on the quality of the disclosed financial information based on their analysis.

• A detailed written presentation which will be turned in hard copy to me on the due date (November 29th).

• Summary PowerPoint or other similar materials used for an oral presentation to the class,

• An oral presentation by the team to the class of their analysis.

• A brief question and answer session where the team will answer questions from the other teams and/or myself.

• A peer evaluation of your teammates with respect to the semester presentation and an evaluation of the presentation of each of the other team’s presentation.

Details of the Team Semester Project are more fully explained in Exhibit C.

Team Participation and Conflict Resolution

An important learning objective for this class is for students to work successfully in a team environment. In the event that interpersonal challenges among team members arise, it is the hope that the individuals involved within their respective teams will be able to resolve their differences amongst themselves. In the unfortunate situation where, a student desires to separate from their team or if a team desires to remove a team member, they will need to follow the procedure for doing so outlined in Exhibit A.

Emergency Information and Emergency Phone Numbers

If an officially declared emergency makes travel to campus infeasible, USC Emergency Information will provide safety and other updates, including ways in which instruction will be continued by means of blackboard, teleconferencing, and other technology.

Emergency Info Line 213-740-9233 USC Emergencies 213-740-4321

USC Public Safety—Non Emergencies: 213-740-6000 Information Tune to KUSC Radio at 91.5 (FM)

USC Info Line 213-740-2311 Police/Fire Emergencies 911

Support Systems

Students whose primary language is not English should check with the American Language Institute , which sponsors courses and workshops specifically for international graduate students. 

The Office of Disability Services and Programs  provides certification for students with disabilities and helps arrange the relevant accommodations. 

Discrimination, sexual assault, and harassment are not tolerated by the university.  You are encouraged to report any incidents to the Office of Equity and Diversity  or to the Department of Public Safety, . 

This is important for the safety of the whole USC community.  Another member of the university community – such as a friend, classmate, advisor, or faculty member – can help initiate the report or can initiate the report on behalf of another person.  The Center for Women and Men  provides 24/7 confidential support, and the sexual assault resource center webpage  describes reporting options and other resources.

Academic Conduct

Students enrolled in any class offered by the Leventhal School of Accounting are expected to uphold and adhere to the standards of academic integrity established by the Leventhal School of Accounting Student Honor Code.  Students are responsible for obtaining, reading, and understanding the Honor Code System handbook.  Students who are found to have violated the Code will be subject to disciplinary action as described in the handbook.  For more specific information, please refer to the Student Honor Code System handbook, available in class or from the receptionist in ACC 101.

Plagiarism – presenting someone else’s ideas as your own, either verbatim or recast in your own words – is a serious academic offense with serious consequences.  Please familiarize yourself with the discussion of plagiarism in SCampus in Section 11 Behavior Violating University Standards .  Other forms of academic dishonesty are equally unacceptable.  See additional information in SCampus and university policies on scientific misconduct, .

Classroom Etiquette and Advance Preparation Expectations

It is expected that everyone will practice courtesy, professionalism and respect to one another while in the classroom. We will discuss the use of electronic devices (cell phones, laptops, etc) during the first class meeting. It is expected that students will have completed the individual advance required reading, individual homework assignments and that the team projects before the time of the scheduled class meeting. Some of the reading assignments are not in the text book and the advance reading materials will be posted to Blackboard. A schedule of the advance reading and homework assignments is included in Exhibit B.

EXHIBIT A- Process for Team Separation

An important learning objective of this course is for students to develop leadership and team skills. While many, if not all, organizations have some level of dysfunction, in most cases, working through the dysfunction to a successful conclusion is the best course of action. It is a very serious matter if there is dysfunction in a team to point when separation is contemplated. However, in the uncommon situation when separation is unavoidable, the processes below shall govern.

A member of a team wishes to separate from the team. If a member of a team wishes to separate from his/her team, then the person desiring to separate must first meet with me and discuss the issues and their rationale for desiring separation. I will attempt to arrange a mediation conference to resolve the issues. If a reconciliation cannot be made, the separation shall occur ; however, depending on the circumstances, I may penalize any and all parties grading points. The individual who is separating may request to be assigned to another team or shall have the right to form a single member team and in such case, shall be responsible for all of the course work the same as any other team.

A team wishes to remove a member from team. If a team wishes to separate itself from a member, then those members should meet with me collectively as a group and discuss the issues and rationale for separation. I will attempt to arrange a mediation conference to resolve the issues. If a reconciliation cannot be made, then the separation shall occur; however, depending on the circumstances, I may penalize any and all parties grading points. The individual who is being asked to leave the team shall have the right to be assigned to another team or to work as a single member team. If the individual chooses to work as a single member team, then they are responsible for all of the course work the same as any other team.

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EXHIBIT C- Form and Content of Team Semester Project

On day 1 of this class, each student joined a team. One of the team’s first assignments was to select a company that each team would evaluate throughout the semester (the “Selected Company”). During the course of the semester, the team will present a number of weekly cases on their Selected Company. These Weekly Team Case Assignments will focus on current topics that we are exploring in class. The purpose of the Weekly Team Case Assignments is to provide real life examples for the topics being covered at that point in the class. The Team Semester Project is a comprehensive exercise designed to allow each team to demonstrate their comprehensive learning and mastery of the topics covered during the entire semester.

The Team Semester Project is a case in which each team will prepare a detailed financial analysis of their Selected Company, and will prepare a comparative analysis on one or more competing companies. Therefore, each team shall select no less than one and not more than three competitors or other companies operating in a similar industry as the team’s Selected Company (these will be referred to as the “Selected Competitors”). Each of the Selected Competitors should be publicly traded on a US stock exchange. It is suggested that the Selected Competitors are chosen by each team early in the semester. If a team is having difficulty in finding Selected Competitors for the Team Semester Project, the team should contact me and discuss as soon as possible, and certainly before time of the mid-term exam.

The Team Semester Project will be due on November 29, 2016 and will be worth 15% of the graded elements for this course. Each Team Semester Project will be evaluated on the following:

• A written comparative financial analysis of the Selected Company and the Selected Competitors .

• An oral presentation to the class, accompanied by a PowerPoint, or other similar presentation materials, in which the Team will present its analysis and conclusions. (The time allotted for the oral presentation will be provided prior to the due date of November 29, 2016.).

• Participation in a question and answer session with each of the other teams when they make their respective presentations

• Peer evaluation of each member of the team and an evaluation of the semester presentations of the other teams.

Details for the form and content of the comparative analysis and the oral presentation are given below.

EXHIBIT C- Form and Content of Team Semester Project

Form and Content of the written comparative financial analysis of the Selected Company and the Selected Competitors

A- The written presentation is due in paper form on November 29, 2016 at the beginning of the class session.

B- The financial analysis should cover at least three fiscal years and compare the Selected Company and the Selected Competitors, and provide comparative financial analysis and the team’s observations as to relative strength and weakness for the Selected Company and the Selected Competitors in the following areas :

a. Liquidity,

b. Capital Structure and Solvency,

c. Cash flow from continuing operations

d. Profitability

e. Return on Investment

C- Prepare a three year analysis of the income statements for Selected Company and the Selected Competitors. The analysis may be in any form that each team chooses ( trend, common size, base year etc.), but the analysis should be accompanied by a conclusion of the analysis.

D- Prepare a comparative two year analysis of the sources and uses of cash for Selected Company and the Selected Competitors. Analyze the differences in cash flow from operations and ability to service debt obligations, pay dividends and funds capital projects.

E- Additionally, evaluate the following issues and provide comparative observations for the Selected Company and the Selected Competitors

a. The non-GAAP measures that any of companies discusses in their MD&A or in their press releases, or investor calls.

b. Compute any off balance sheet contingencies ( Change in Control liabilities, pension liabilities, etc.)

c. For the CEO and CFO of each company , analyze their annual compensation levels. Compare cash versus equity compensation for each.

F- Using the current market price of the common stock and by computing comparative financial market ratios for the Selected Company and the Selected Competitors, present a comparative analysis, on the current market price of the common shares for the Selected Company and the Selected Competitors. Feel free to include in your analysis the multiple of the stock price to net income or to any other Non-GAAP measure regularly used by these companies in their disclosures (press release, investor calls, or MD&A.).

G- Important items to include in the presentation

a. Include all sources and reference materials used to prepare the analysis

b. If the team used any estimates rather than actual disclosed amounts by any of the companies, because the disclosures were not disclosed or readily transparent, disclose the basis for any estimate made by the team.

c. Please do not include any extraneous materials that do not support your analysis or conclusions.

d. A team should feel free to use any of the materials that they previously prepared for the Weekly Team Case Assignments.

EXHIBIT C- Form and Content of Team Semester Project

Form and Content of the oral presentation of the Selected Company and the Selected Competitors

A- The oral presentation will be made in class on November 29, 2016. There are no scheduled earlier presentations.

B- Prepare a PowerPoint presentation, or using similar media, which will be used to guide the class through the presentation of the analysis relating to the Selected Company and the Selected Competitors. The presentation materials may be presented using the audio visual capabilities of the classroom, or they may be distributed in hard copy to the class.

C- The oral presentation should focus on communicating to the class the analysis, observations and conclusions of the more detailed written financial analysis which will be turned in to me at the beginning of class on November 29, 2016 and detailed above in Exhibit C.

D- The presentation should be brief, likely 10 minutes or less. The exact amount of time allotted for the presentation will be provided closer to the date of the Oral Presentation (November 29). The presentation will be followed by a brief question and answer period. Given the number of teams, it is important that each team has sufficient time to make their presentation and have time for questions and answers.

E- An important point to keep in mind for having a successful presentation is to have a rationale for any conclusions and observations.

F- In addition to participating in the oral presentation of the analysis of the Selected Company and the Selected Competitors, each team is expected to actively participate in the question and answer period of the oral presentation of the other teams.

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