SAMPLE

NEW YORK UNIVERSITY

Leonard N. Stern School of Business Administration

Summer 2007

B10.2303.U1 Prof. Dov Fried/Joshua Livnat

Financial Statement Analysis Office Hours: by appointment

8/20,21,23 6-9, 8/26 9-4, 8/27,28,30 6-9,

9/4,6 6-9, 9/9 9-4 Office: K-MEC 10-81/K-MEC 10-76

Classroom: MEC 5-140 Phone: 998-0005/998-0022

Fax: 995-4004

E-mail:

Web page: www.stern.nyu.edu/~jlivnat E-mail:

Course Description:

The objective of this course is to illustrate the application of information communicated in financial statements about the operating, investing, and financing activities of business entities within the USA and abroad. The course will concentrate on accounting disclosure standards, the differential effects of alternative accounting principles, and the interpretation of financial information. Traditional and nontraditional methods of financial statement analysis will be discussed and evaluated. The course is designed to develop financial analysis skills, as well as an appreciation for the limitations of these skills in various contexts.

Pre-requisites:

Students are assumed to have a working knowledge of accounting principles comparable to materials covered in the core financial accounting course.

Classroom Procedures:

The basic approach to class sessions will be a combination of discussions and lectures. A wide variety of examples will be used to discuss the different topics addressed. Another important objective is to foster a debate with and among students. Current events, reported in the Wall Street Journal and other financial periodicals, will be discussed.

The class materials and communications will be handled through BlackBoard. To log in, you need to use your E-mail ID and password. You can log in to Blackboard with your Stern netID and password! Go to:

http://sternclasses.nyu.edu

Please feel encouraged to contact me through E-mail or phone if you have any questions.

Texts:

Required:

The Analysis and Use of Financial Statements, H.D Fried, A. Sondhi and G. White, John Wiley, Third edition, 2003.

Recommended:

1. Kenneth S. Hackel and Joshua Livnat, Cash Flow and Security Analysis, Business-One Irwin, Second Edition, 1995.

.

2. Intermediate Accounting, Latest Edition, Kieso & Weygandt, John Wiley.

Grade:

Quizzes (at least 10) 80%

Group Project 20%


Course Schedule

Date / Subject / Reading
1 & 2 / 8/20
8/21 / Introduction
Income Statement
Revenue Recognition
Nonrecurring Items / Skim Ch 1
Ch 2
Skim Ch 8 (275-279)
Thousand Trail Part I
3 / 8/23 / Cash Flow Analysis / Ch 3
4 & 5 / 8/26 / Cash Flow Analysis (Continued)
Ratio Analysis
Inventory / Thousand Trail Part II
Ch 4
Ch 6
6 / 8/27 / Inventory (Continued)
Long-Lived Assets / Ch 7
7&8 / 8/28
8/30 / Leases & Pensions / 11,12
9 / 9/4 / Income taxes / 9
10 / 9/6 / Investments in other firms / 13
9/6 / Intangibles / 14
11 / 9/9 / Stock options to employees / pp. 438-442
9/9 / Various definitions of earnings
12 / 9/9 / Market anomaly - PEAD
9/9 / Market anomaly - Accruals

Group Project

(5 students per group)

1. Choose a manufacturing, merchandising or a service firm for an in-depth analysis. Make sure the firm has at least 3 segments.

2. Analyze the economic environment of the firm. Use the check-list provided in class. Make sure to include an analysis of segments.

3. Provide analysis of the industries in which the firm operates, including future expectations.

4. Analyze financial ratios of the firm. List some questions you would have wanted to ask management.

5. Estimate components of operating cash flows. Analyze the statement. Provide a list of questions you would have wanted to ask management.

6. Find the free cash flow for the most recent year and the four-year average free cash flow. Estimate the free cash flow multiple.

7. Provide an estimate of net assets for the most recent balance sheet date, taking into account such items as pensions, other post-retirement benefits, and leases.

8. Try to find answers to your questions through the management letter or discussion of operations. If you still have unanswered questions call up the firm and get their replies. Incorporate that in your report.

Expected length - 5 typewritten pages and

as many appendices as

needed