IIBD INTERNATIONAL SUMMER INSTITUTE 2007
IIBD-4630 Security Analysis and Valuation (with an International Approach)
Dr. Merav Ozair, Pace University, USA
stEnglish James, Applied Equity Analysis, McGrew Hill, 1 Edition (Hereafter JE)
rdCopeland, Kohler and Murrin, Measuring and Managing the Value of Companies, Wiley, 3 Edition
Schilit , Financial Shenanigans, McGrew Hill
Stickney and Brown, Financial Reporting and Statement Analysis, Harcourt
Hooke, Security Analysis on Wall Street, Wiley
Mulford and Comisky, Financial Warnings, Wiley
The main focus of this course is to evaluate the information in financial reports of businesses enterprises, with an emphasis on the uses of financial statements by business managers and persons outside the company, such as investors, creditors and financial analysts. This course in intended to provide practical valuation tools for valuing a company. It will cover techniques of financial statements, evaluation of the quality of financial data, prediction of financial variables, cash flow and accounting valuation models.
We will discuss a wide range of concepts from financial reporting and finance that are useful for security analysis and valuation and apply them in case studies and on market data. In the application and implementation of the techniques and methods learned the focus will be on international companies incorporated in Asia, Europe and the USA, which compete in the international arena (e.g., Toyota, Ford, and Mercedes-Benz). We will learn how to analyze such companies and compare them to their international peers.
Security Analysis is primarily an application course. It introduces very little theory beyond that covered in prior finance and accounting courses. I will assume that students have taken courses such as corporate finance, introduction to finance and introduction to financial accounting, and have a strong grasp of basic accounting and finance.
An understanding of accounting is essential for this course. There is no requirement for advance
accounting courses taken in the past. However, the stronger your accounting background is the more prepared you will be for this class.
Case write-up 30%
Participation and discussion 10%
Final Exam 30%
Group Project 30% (25% content, 5% presentation)
EXPLANATION OF GRADING:
Write-ups: Case write-ups can be done in small groups. They should be no longer than two typed pages, double-spaced, with no more than three supporting pages of tables and calculations, and must be handed at the beginning of the session in which the case is assigned.
Group Project: This assignment will be submitted on the day of presentation (most likely session before last.) This assignment will be assigned half way through the course. You will be required to identify and obtain relevant information and apply the tools of analysis described in the course as part of a complete analysis and valuation of an international company. Your submitted product is limited
to 8-10 pages, double-spaced. Your analysis must include (not as part of the 8-10 pages) supporting tables. Each group will be required to make 20 minutes project presentation. More details will be given in class.
Final Exam: This exam will be given at the last class and will cover all topics covered in this course.
General: Top quality performance is expected from every student. You must attend every class with some prior preparation for the topic to be discussed. Students will need to prepare for materials ahead of the class sessions. You will be expected to participate and improve the quality of classroom discussions. Regular and timely attendance is the first step in doing well in this course.
Extra Credit: Extra credit projects will not be assigned under any condition. Please make a note of it and refrain from requesting such projects.
Cheating and Plagiarism: Cheating and plagiarism will not be tolerated. If caught, the student will receive an automatic zero for that assignment.
Make-up: Given the extremely short duration of this course, there will not be any provision for make-up exams.
Cell Phone: Cell phones need to be either turned off or put in vibration mode.
Curve: No curve – please do not ask!
Tentative Course Schedule:
Session Topic Readings 1 A. Introduction JE: Chapter 1
2 A. Industry Analysis JE:Chapter 20
B. Competitive Strategy Analysis
Discussion: Ratio Analysis JE: Chapter 7
3 A. Industry Analysis JE:Chapter 3 and 4
B. Competitive Strategy Analysis
Discussion: Analysis of Cash Flow JE: Chapter 13
4 A. Accounting Choices JE: Chapters 6,8 and 9
B. Quality of Earnings
C. Red Flags
5 A. Introduction to Valuation Methods JE: Cahpters 11 and 12
6 A. Free Cash Flow to the Firm JE: Chapter 14
B. Terminal Value Calculation
Discussion: Estimating the Cost of Capital CMK: Chapter 8
7 A. P/E Multiples JE: Chapters 15 and 17
B. P/BV Multiples
C. Other Multiples
8 A. Acquisitions JE: Chapter 19
B. Stock Repurchase
C. Stock Options
9 A. Behavioral Finance JE: Chapter 5
10 A. Credit Analysis and Bankruptcy Prediction S&P Corporate Ratings
Other material will be handed
11 A. Shareholders’ and Managerial Efficiency Material will be handed out
12 A. Market Analysis and Securities Analysis Material will be handed out
13 Project Presentation
14 Final Exam