Fin 3321 – Moore                                       Syllabus – Spring - 2007
                        Finance 3321 Sylla...
Fin 3321 – Moore                                    Syllabus – Spring - 2007

Broad learning outcomes

On completion of th...
Fin 3321 – Moore                                            Syllabus – Spring - 2007

Grade Determination and Components...
Fin 3321 – Moore                                              Syllabus – Spring - 2007

             Projected Timetable...
Fin 3321 – Moore                                               Syllabus – Spring - 2007

Fin 3321 – Moore                                                              Syllabus – Spring - 2007

Students with Disa...
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  1. 1. Fin 3321 – Moore Syllabus – Spring - 2007 Finance 3321 Syllabus Spring - 2007 Module Topics - Business Analysis and Valuation - Financial Statement Analysis Dr. Mark E. Moore 906 Rawls School of Business (742-3185) Department of Finance Email: Texas Tech University Web Page: Course Meeting Times: Section 1 Tues/Thurs 11:00 – 12:20 BA 057 Section 2 Tues/Thurs 2:00 – 3:20 BA 266 Section 3 Tues/Thurs 3:30 - 4:50 BA 266 Office Hours: Wednesdays 10:00 – 12:00; 2:00-4:00 and by appointment Introduction This unit involves the analysis of financial information - in particular, firms' financial reports - for making business investment decisions. The primary focus is on equity valuation, with some attention given to credit analysis and the valuation of debt. Fundamental analysis will be examined in detail and applied in cases involving public corporations. However, these tools are applicable to privately held firms and strategic business units. Topics include models of shareholder value, a comparison of accrual accounting and discounted cash flow approaches to valuation, the analysis of profitability, growth and valuation generation in a firm, testing the quality of financial reports, forecasting earnings and cash flows, pro-forma analysis for strategy and planning, analysis of risk, and the determination of price/earnings and market-to-book ratios. Unit objectives The unit will be taught from a security analyst's perspective - particularly the equity analyst - but much of the material covered in the course will also be relevant to the corporate financial analyst or bank loan officer for evaluating acquisitions, restructurings and other investments, and for calculating the value generated by strategy scenarios. By the end of the course, you should feel competent in writing a thorough, convincing equity research report. The course is of interest to those contemplating careers in investment banking (particularly in equity research), security analysis, consulting, public accounting, and corporate finance. It will also help with personal investing. 1 January 2007 -1-
  2. 2. Fin 3321 – Moore Syllabus – Spring - 2007 Broad learning outcomes On completion of this course, you should be able to answer the following questions: • How are fundamental values (or “intrinsic values”) estimated? • How are business strategies analyzed in order to understand the value they create? • What business activities determine value? • How is “value created for shareholders” identified? • What is the role of financial statements in calculating equity values? • How does one pull apart the financial statements to get at the relevant information for valuing equities? • What is the relevance of cash flows? Of dividends? Of earnings? Of book values? • How does ratio analysis help in valuation? • How does profitability tie into valuation? • What is growth? How does one analyze growth? How does one value a growth firm? • How does one analyze the quality of financial reports? • What determines a firm's P/E ratio? • What determines a firm's market-to-book (P/B) ratio? • How does one evaluate risk? For equity? For debt? Textbooks: Required: Palepu, Healy and Bernard, Business Analysis and Valuation (Ohio: Thomson-Southwestern, 3rd Edition, 2004). Other Texts: Stephen H. Penman, Financial Statement Analysis and Security Analysis (New York: McGraw Hill – Irwin, 2nd Edition, 2004). Copeland, Keller and Murrin, Valuation: Measuring and Managing the Value of Companies (New York: John Wiley & Sons, 3rd Edition, 2000). 1 January 2007 -2-
  3. 3. Fin 3321 – Moore Syllabus – Spring - 2007 Grade Determination and Components: Regular Exams: There will be three (90 minutes) examinations during the semester. The planned coverage for these exams is indicated in the course timetable. Late exams or make-up exams will neither be offered nor accepted. Please note, these are combined evening exams for all sections of this course. Collected Assignments: There will be “pop” quizzes and collected homework. Each assignment collected will have equal weighting toward your grade determination. The lowest quiz score will be dropped. This option is not available for collected homework. No late assignments or make-up work will be accepted. Group Equity Valuation Project: The group equity valuation project is a practical application that integrates all aspects of material that will be presented in this course. The purpose of the project is to prepare a comprehensive equity analyst’s valuation report and analysis of a selected firm. Examples of such reports will be presented in the class throughout the semester. Completion of the project will provide you the opportunity to partake in a “real-world” analyst activity. Also, the finished report has proven to be a beneficial job search and interview tool. Cumulative Final Examination: Each section will sit for a cumulative final examination at the time and date appointed by the university. Percent Course Total Hourly Exams: 3 @ 12% 36% Collected Assignments: 10% Group Valuation Project Interim Reports: 6% Group Valuation Project (Comprehensive): 28% Comprehensive Final Examination: 20% --------------- Course Total 100% Final Course Grade Policy: 100 – 98 A+ 89 – 88 B+ 79 – 78 C+ 69 – 68 D+ 97 – 93 A 87 – 82 B 77 – 72 C 67 – 62 D 92 – 90 A- 81 – 80 B- 71 – 70 C- 61 – 60 D+ 1 January 2007 -3-
  4. 4. Fin 3321 – Moore Syllabus – Spring - 2007 Projected Timetable – Subject to Modifications Date Material Covered Topic and Assignments Thurs-Jan 11 1 Chapter 1 Valuation Framework and Course Overview Tues -Jan 16 Chapter 1 Valuation Framework Thurs–Jan 18 Chapter 2 Business Strategy Analysis – 5 Forces Tues–Jan 23 Chapter 2 Business Strategy Analysis – 5 Forces Thurs-Jan 25 Chapter 2 Business Strategy Analysis – 5 Forces Tues–Jan 30 Chapter 3 Quality Financial Reporting - Transparency Thurs-Feb 1 Chapter 3 Value of Quality Financial Reporting Tues-Feb 6 Chapter 4 Nature of Financial Reporting Distortions Thurs-Feb 8 Chapter 4 Screening Ratios for Reporting Distortions Tues–Feb 13 Chapter 4 Analyzing and Re-stating Distorted Financial Reports Exam 1 (Ch 1 - 4) Evening 6:00pm (90 Minutes) Thurs–Feb15 Chapter 5 Financial Analysis – Ratios and Cash Flow Tues–Feb 20 Chapter 5 Financial Analysis – Ratios and Cash Flow Thurs–Feb22 Chapter 6 Financial Forecasting Methods Tues– Feb 27 Chapter 6 Financial Forecasting Methods Thurs-Mar 1 Chapter 7 Method of Comparables Valuation Tues–Mar 6 Chapter 7 Method of Comparables Valuation Thurs-Mar 8 Chapter 8 Cost of Capital Estimation Tues– Mar 13 Spring Break Thurs-Mar 15 Spring Break Tues– Mar 20 Chapter 8 Cost of Capital Estimation Exam 2 (Ch. 5-8) Ratios, Forecasts, Multiples, Cost of Capital Thurs-Mar 22 Chapter 7 Discounted Dividends Valuation 1 January 2007 -4-
  5. 5. Fin 3321 – Moore Syllabus – Spring - 2007 Projected Timetable (Continued) Date Material Covered Topic and Assignments Tues-Mar 27 Chapter 7 Free Cash Flow Valuation Thurs-Mar 29 Chapter 7, 8 Free Cash Flow Valuation Tues– Apr 3 Chapter 7, 8 Residual Income Valuation Thurs-Apr 5 Chapter 7, 8 Residual Income Valuation Tues– Apr 10 Chapter 7, 8 Abnormal Earnings Growth Valuation Thurs-Apr 12 Chapter 7, 8 Abnormal Earnings Growth Valuation Tues– Apr 17 Chapter 8 Sensitivity Analysis Exam 3 (Ch 7-8) Valuation Methods Thurs-Apr 19 Chapter 8 Sensitivity Analysis Tues– Apr 24 Chapter 10 Credit Analysis and Financial Distress Thurs–Apr 26 Chapter 10 Credit Analysis and Financial Distress Tues – May 1 Course Capstone Valuation Projects Due in Class Thurs –May 3 Final Exam Section 1: 1:30 – 4:00 pm Mon – May 7 Final Exam Section 2: 7:30 – 10:00 am Tues – May 8 Final Exam Section 3: 4:30 – 7:00 pm Important Dates: Friday January 19 - Formation of Valuation Project Groups Wednesday January 24 - Selection of Firm to Value by Groups Due Thursday February 8 - Draft, Part 1: Business & Industry Analysis Due Tuesday February 13 - Exam 1 Chapters 1 – 4; 6pm – all sections Thursday February 22 - Draft, Part 2: Accounting Analysis Due Tuesday March 20 - Exam 2 Chapters 5 – 8; 6pm – all sections Wednesday March 21 - Last Day to Drop a Class Thursday March 29 - Draft, Part 3: Ratio Analysis; Forecast Financials; Cost of Capital Estimation Tuesday April 17 - Exam 3 Chapters 7 – 8 (Valuation Models) * During the week beginning April 16, all groups must meet in my office to present evidence (hardcopy spreadsheets) that all valuation models have been implemented. Failure to meet this deadline will result in a 15% reduction in the Group Project Paper grade. Tuesday May 1 - Valuation Projects Due in Class 1 January 2007 -5-
  6. 6. Fin 3321 – Moore Syllabus – Spring - 2007 Students with Disabilities and Those Requiring Special Assistance First and foremost, under Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990, "No otherwise qualified person with a disability in the United States . . .shall, solely by reason of . . .disability, be denied the benefits of, be excluded from participation in, or be subjected to discrimination under any program or activity receiving federal financial assistance." I/We certainly have a legal and moral responsibility to accommodate our disabled students. But I/we do not, and should not, have to treat disabled students in a manner that places them at a competitive advantage or disadvantage with their classmates. Any student claiming a disability needs to be referred to AccessTech, which is the University's Disability Support Program. The Faculty Guide to AccessTech, which includes faculty responsibilities in dealing with disabled students, is available at Student Disabilities Policy: Any student who, because of a disabling condition, may require special arrangements in order to meet course requirements should contact the instructor as soon as possible. Students should present the appropriate documentation from AccessTech verifying their disability, and outlining the special arrangements required. No accommodations will be provided disabled students prior to completion of this approved University process. Student Academic Integrity Policy: Ethical conduct is an important component of any profession. The Texas Tech University Code of Student Conduct is in force during all elements of this course. Students violating any portion of the Academic Code will be sanctioned and prosecuted to the fullest extent provided by the University. Ours’ should be a self-monitoring profession. Your reputational capital is the greatest asset you will bring to the market. It is hard to gain, too easy to tarnish, and nearly impossible to recover. It is the obligation of all students to report violations of the honor code in this course. The following is taken from the Texas Tech Student Handbook. Please follow the link below to examine relevant regulations and ruling regarding codes of Academic Integrity. “Academic dishonesty" includes, but is not limited to, cheating, plagiarism, collusion, falsifying academic records, misrepresenting facts, and any act designed to give unfair academic advantage to the student (such as, but not limited to, submission of essentially the same written assignment for two courses without the prior permission of the instructor) or the attempt to commit such an act. Texas Tech Student Handbook, 2005-2006, Code of Student Conduct, Part IX, Section B, item number 3. 1 January 2007 -6-