©2019 Jan Barton14 January 2019Financial Statement AnalysisACT 414/514—Spring 2019Prof. Jan Barton, PhD, MTax, CPAContact:[email protected], +1 (404) 727.6398Office hours:GBS 460, by appointmentClass time/place:ACT 414: GBS 334, TuTh 10:00–11:15 am and 11:30–12:45 pmACT 514: GBS 208, Th 6:30–9:15 pmTeaching assistants:Leo Barcellos, Rita Han, Drashti Patel, Neil Shahdadpuri, andRikki WinterCourse descriptionFinancial statements play a vital role in everyday commerce and in the broader functioning of a market economy.They are used to asses a company’s overall performance and risk, design corporate strategy, set up and monitorcontracts between the company and its stakeholders, and value these stakeholders’ claims to the company’s as-sets. Financial statements are designed to provide information useful for decision making in a wide range of busi-ness contexts, and so they tend to be highly complex documents—most people find them just simply daunting andimpenetrable. Business leaders must feel comfortable finding, understanding, and evaluating financial information,which is why analyzing financial statements is a core competency that you must develop if you want a successfulcareer in finance, marketing, consulting, entrepreneurship, or any other business field.In this course, you will learn to extract information from a company’s financial statements and use it to gain in-sights into the company’s financial performance and risk, forecast future financial outcomes, and evaluate enter-prise and equity market values. As the figure below shows, you will learn and apply a framework that focuses onfour major areas of analysis: (1) the effects of a company’s business environment and competitive strategy on itsfinancial statements, (2) the company’s business transactions and financial reporting quality, (3) the company’sperformance and risk as measured by common financial ratios and cash flow patterns, and (4) the company’s pro-spects as reflected by earnings/cash flow forecasts and stock valuations. Throughout the course, you will analyzeactual financial statements of well-known publicly traded companies operating around the world.Strategyanalysis•Business environment•Competitive strategyAccountinganalysis•Business transactions•Reporting qualityPerformance &risk analysis•Financial ratios•Cash flowsProspectiveanalysis•Forecasts•Valuation
2Learning objectivesThe main goal of this course is to help you become a confident, savvy user of corporate financial reports—not toturn you into a Wall Street analyst or a CPA. By the end of the course, you should be able to:1Explain why financial reporting matters.That old cliché about accounting being the language of business is pretty much true. You will distinguish the roles thatfinancial statements play in valuation and contracting. You will learn theories and evidence on how information infinancial reports affects market values of corporate securities and contracts between companies and their stakehold-ers.
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