Syllabus for A440



GSBA 581

Financial Statement Analysis and Valuation

Fall 2016

Professor: Mark Soliman

Email: msoliman@usc.edu

Office: HOF 813

Office Hours: By appointment (I live in Irvine, so meeting up in OC is easy)

Class time: 6-10pm on Thursdays

Course Description

Over the next ten weeks we will discuss financial reporting from a user’s perspective, use a variety of tools to break apart financial reports into meaningful units for analysis, forecast financial statements, and value a firm.

Course Objective

The objective of this course is to provide you with the knowledge and skills necessary to analyze, interpret, understand, and use financial information to make informed decisions.

A581 will require you to think critically about issues for which there are no “correct” answers. Hence, your analysis and conclusions must be based on sound assumptions and well-constructed analysis and arguments. Critical thinking is a skill that is required for advancement in the professional world, and therefore, it is a skill that we will focus on and sharpen in A581.

It’s more important for students to know how to think

than to know a particular thinker.

—Tim Riordan

Course Format

Approximately half of the classes in A581 will consist of interactive lectures, and half will consist of case discussions. I use cases extensively in A581 because:

Cases present information in a format encountered in the “real” world (i.e., they provide lots of information—some relevant, some not. It is up to you to decide what information to use).

We don’t all learn in the same way—cases allow for flexibility in how material is learned.

Cases link classroom materials with daily business events (as described in newspapers, television news programs, and business magazines).

I will provide focus questions to guide you in reading most cases.

Required Materials

1. ACCTG 581 Course Pack. Students should order the course reader online at the bookstore.

2. I will distribute cases and exercises not included in the above course pack in class.

Recommended Materials

1. Brown, Stickney, Wahlen, Baginski, and Bradshaw, Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective, Thomson South-Western, 7th Edition (denoted WBB).

Communication

I will use e-mail to periodically send you information. Please check your USC e-mail regularly.

Point Distribution

| |Percentage |

|Event Summary |10% |

|Exam I |50% |

|Exam II |30% |

|Professionalism |10% |

|Total |100% |

* I consider all written work as professional writing assignments. Please proof your work.

** The grade for A581 will not necessarily be curved. However, I reserve the right to do so if the median final grade falls outside of the Business School’s mandated range for 500-level classes (3.4 – 3.6).

Event Summary: An Event Summary is a one-page synopsis of a recent (since January 1, 2016) event that you attended, listened to, or observed (e.g., presentations, conference calls, radio or television broadcasts, etc.). Articles do not qualify as events. Your summary should contain the following information:

o List the event (name and date).

o Describe the event.

o Describe how the event relates to a topic we cover in A581.

o Describe what you consider to be a key take-away from the event.

o As if you are in an interview (with a firm of your choosing), describe how what you learned from the event makes you a more attractive candidate.

Your Event Summary is due by September 8th.

• Midterm Exam: Midterm Exam consists of two parts.

o IN CLASS: You will complete part one in class on week 6. IN CLASS will consist of several questions designed to assess your comprehension of the material we will cover in the first five weeks of this quarter (including posted articles). You may use anything but a laptop to complete part one.

o TAKE HOME: You can download the take home portion of the Midterm Exam from the A581 website. The purpose of the take home portion of Midterm Exam is to have you apply the various tools and techniques we cover in A581 to a publicly-traded firm of your choosing. Please sign and return the attached “Firm Sheet” by the end of class on September 1st. You are free to work with others while analyzing your firm, just keep in mind that you must complete the written part of Midterm Exam on your own. You cannot follow Starbucks. In addition, I suggest that you avoid banks, firms that have recently been involved in mergers, and firms with negative equity. The take home portion of the Midterm Exam is due by September 22nd.

Final Exam:

o There will be several questions designed to assess your comprehension of the material we will cover this quarter (including posted articles). You will also forecast financial statements for your firm and use information from those statements to value your firm. You are free to work with others while creating your spreadsheet, just keep in mind that you must complete the written portion on your own. I will distribute the requirements on October 6th. It is due after the last day of class, November 10th at 5 PM.

Professionalism: I expect you to treat this class as you would treat any professional responsibility. For example, I expect you to be on time and prepared to discuss all materials relevant to the topic of the day. I also expect you to let me know in a timely manner when you are unable to attend class. I strongly believe that learning is an active process. Hence, your participation is evaluated on a daily basis and figures prominently in your professionalism score. I use the following guidelines when computing your professionalism score:

|If you miss class and fail to notify me in a timely manner: | |

| Zero times |Full credit |

| One time |–10% |

| Two times |–20% |

| More than two times (or excessive absences with notification) |–50% |

| | |

|If you participate in class: | |

| More than five times |Full credit |

| One – five times |–20% |

| Zero times |–50% |

Financial Statement Analysis – ACC 581

Autumn 2016

Thursday Course Overview

Session Date Topic

Framework for Analysis

1 Thu Aug 25 Introduction and Overview

2 Thu Aug 25 Industry Analysis

3 Thu Sep 1 Case: Stamford

4 Thu Sep 1 Case: CUC International

Accounting Quality Analysis

5 Thu Sep 8 Ratio Analysis

6 Thu Sep 8 Case: Compuware

7 Thu Sep 15 Revenues and Expenses

8 Thu Sep 15 Case: Groupon

9 Thu Sep 22 Assets, Liabilities and Equity

10 Thu Sep 22 Review and Overflow –

Take Home Portion of MIDTERM EXAM due by end of class, September 22nd

11 Thu Sep 29 In-class midterm Exam

12 Thu Sep 29 In-class midterm Exam

Prospective Analysis and Valuation

13 Thu Oct 6 Accounting Based Valuation

14 Thu Oct 6 General Investing and multiple based valuation

15 Thu Oct 13 Forecasting Financial Statements

16 Thu Oct 13 Case: Starbucks

17 Thu Oct 20 Forecasting Starbucks

18 Thu Oct 20 Case: Starbucks and Valuation Related Issues

19 Thu Oct 27 Case: Starbucks Five Year Forecasts

20 Thu Oct 27 Overflow and Review

TAKE HOME FINAL EXAM will be due on November 10th at 5pm.

|WEEK |TOPICS |PRIOR TO CLASS |

| | | |

|Framework for Analysis | | |

|1 | | |

|August 25 - Class #1 |Introduction and overview | |

| |The link between financial information and the market, |WBB Chapter 1 & 2 |

| |investors, and managers | |

| | | |

|August 25 - Class #2 |Industry analysis |CP: “Information Collection”, |

| |Firm-specific analysis |“Understanding the Business”, |

| |Interim reporting |“Interim Reporting”, and “Oakley” |

|2 | | |

|September 1 - Class #3 |Case: Stamford International |CP: “School Teachers”; |

| |Firm Sheet due by end of class today |Case |

| | | |

|September 1 - Class #4 |Case: CUC International |Case |

|Accounting Analysis | | |

|3 | | |

|September 8 - Class #5 |Ratio analysis and cash flows |WBB Chapter 4 |

| | |Financial Shenanigans |

| | | |

|September 8 - Class #6 |Case: Compuware |Case |

| |Event Summary due by end of class today | |

|4 | | |

|September 15 - Class #7 |Revenues and expenses |WBB Chapter 9 |

| | | |

|September 15 - Class #8 |Case: Groupon |Case |

|5 | | |

|September 22- Class #9 |Assets, liabilities and equity |CP: “Reporting Segment Information”|

| |Segment reporting | |

| |Take Home Portion of Midterm Exam due by end of class today | |

| | | |

|September 22 - Class #10 |Overflow and Part one of Midterm Exam Q&A | |

| | | |

| | | |

|6 | | |

|September 29 - Class #11 & 12 |In Class Portion of Midterm Exam | |

| | | |

|WEEK |TOPICS |PRIOR TO CLASS |

| | | |

|Prospective Analysis and Valuation | | |

|7 | | |

|October 6 - Class #13 |Accounting Based Valuation |WBB Chap 5 |

| |Distribute Final Exam at end of class today | |

| | | |

|October 6 - Class #14 |General Investing and Multiple Based Valuation |WBB Chap 11 & 12 |

| | | |

| | | |

|8 | | |

|October 13 - Class #15 |Forecasting financial statements | --after class-- |

| | |CP: “Forecasting Financial |

| | |Statements” |

| | | |

|October 13 - Class #16 |Case: Starbucks |Case |

|9 | | |

|October 20 - Class #17 |Forecasting Starbucks | |

| | | |

|October 20 - Class #18 |Valuation and related issues |CP: “Using a Valuation Model to |

| |Case: Starbucks |Estimate a Firm’s Stock Price” |

|10 | | |

|October 27 - Class #19 |Case: Starbucks Five Year Forecasts |Case |

|October 27 - Class #20 |Overflow and Final Exam Q&A | |

| | | |

| | | |

|November 10th |Final Exam due by 5 PM | |

| | | |

| | | |

| | | |

Your name:

The name of the firm you will follow:

The ticker symbol of the firm you will follow:

By signing below you acknowledge that you are a part of a learning community at the USC Marshall Business School that is committed to the highest academic standards. As a part of this community, you pledge to respect and abide by the institution’s guidelines that call for personal honesty and integrity in all academic endeavors. Specific to A581, you promise not to use prior students’ reports in any way to complete the assignments listed in this syllabus.

Signature Date

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