Accounting-Based Valuation

Catalog description

This course deals with the analysis of financial information to determine value. It synthesizes financial statement analysis, corporate finance, and the valuation of stocks (i.e., investments). The course is divided into two parts. The first part is about how accounting metrics are mapped into stock prices. Students examine various accounting measures (e.g., dividends, free cash flows, book values, earnings) that can be used as inputs for equity valuations, and compare and contrast the different valuation models (e.g., Dividend Discount Model, Free Cash Flows Model, Residual Income Valuation Model, Abnormal Earnings Growth Model). The first part of the course concludes with tools that enable students to infer future implied accounting metrics from equity investments based on what is currently being paid. In the second part of the course, students put the knowledge acquired in the first part into practice to make buy/sell/hold decisions on equity investments involving listed companies.