Career Focus

This course provides a comprehensive framework for using financial statements to evaluate a company’s strategy execution, performance, financial prospects, and value. The primary emphasis is on the analysis of public companies, but the framework and tools are also relevant to private enterprises. This course is particularly valuable to students seeking a career in consulting, corporate finance, hedge funds, venture capital, private equity, or investment banking.

Educational Objectives

The objective of the course is to provide hands-on experience in financial statement analysis and valuation that enhances investment decisions. By the end of the course, students are comfortable with analyzing complex financial statements to gain a richer understanding of firm performance and value. The course is a capstone course for the MBA program as it integrates and extends topics covered in various RC courses, including strategy, finance, and accounting.

Course Content and Organization

The course uses case-based discussions to develop a comprehensive framework that integrates strategy and financial analysis, and applies this framework to fundamental analysis and valuation. The first half of the course develops the framework through two main topics:

• Reporting strategy analysis: assessing a firm's value proposition and identifying its key value drivers and risks; evaluating the degree to which accounting policies and standards capture underlying economics; assessing earnings quality; and making adjustments to eliminate accounting distortions.
• Performance analysis and valuation: assessing current performance and its future sustainability; making forecasts of future profitability and risk; and valuing businesses using earnings and book value data.

The second half of the course applies the above framework to various contexts including equity-investment analysis, IPOs, mergers, short selling opportunities, and hedge fund activist investing strategies. Over the course of the semester, several high-profile guest speakers, such as renowned CEOs and CFOs, short sellers, hedge fund managers, activist investors, and research analysts will share their experiences with students.

To deepen students' ability to apply the course skills in a practical context, they also work on a group project. The project involves a comprehensive analysis using the course framework and a stock pitch to a panel of investors. In the past, students’ stock recommendations have outperformed the market.

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