Cambridge Business Publishers

FLEXIBLE STRUCTURE

The curricula, instructor preferences, and course lengths vary across colleges. Accordingly and to the extent possible, the 16 modules that make up Financial Statement Analysis & Valuation were designed independently of one another. This modular presentation enables each college and instructor to “customize” the book to best fit their needs. Our introduction and discussion of financial statements constitute Modules 1 and 2. Module 3 presents the analysis of financial statements with an emphasis on analysis of operating profitability. Module 4 introduces credit risk analysis. Modules 5 through 10 offer an analysis of accounting numbers and disclosures. The aim of those modules is to help us better interpret financial statements and to adjust those statements as necessary to improve our financial statement analysis. Modules 11 through 15 explain company valuation, which includes the forecasting and adjusting of the accounting numbers. Module 16 concludes with a case analysis of Kimberly-Clark and acts as a capstone for the course.

Transaction Analysis and Statement Effects

Instructors differ in their coverage of financial statement analysis and valuation. Some focus on the analysis of transactions on financial statements using the balance sheet equation format. Others require use of journal entries and/or T-accounts for analysis purposes. We accommodate both v teaching styles. Specifically, Module 2 provides an expanded discussion of the effects of transactions using our innovative financial statement effects template. Emphasis is on the analysis of Apple’s summary transactions, which concludes with the preparation of its financial statements. The module also shows journal entries and T-accounts, which are entirely optional, as other tools to assess the effects of transactions on financial statements. Thus, this module accommodates a spectrum of teaching styles—instructors can elect to use accounting mechanics, or not, to suit their preferences, and their students are not deprived of any information or analysis and valuation skills as a result of that selection.

Flexibility for Courses of Varying Lengths

Many instructors have approached us to ask about suggested class structures based on courses of varying length. To that end, we provide the following table of possible course designs. For instructors desiring greater emphasis on accounting analysis, additional time can be spent on Modules 1 through 10. For instructors desiring greater emphasis on analysis and valuation, additional time can be spent on Modules 11 through 15.

	15 Week Semester-Course	10 Week Quarter-Course	6 Week Mini-Course	1 Week Intensive-Course
Module 1 Framework for Analysis and Valueation	Week 1	Week 1 (Modules 1 and 2)	Week 1 (Modules 1 and 2)	Day 1 (Modules 1 and 2)
MODULE 2 Overview of Business Activities and Financial Statements	Weeks 1 and 2
MODULE 3 Profi tability Analysis and Interpretation	Week 3	Week 2	Week 2	Day 2
MODULE 4 Credit Risk Analysis and Interpretation	Week 4	Week 3	Optional	Optional
MODULE 5 Revenue Recognition and Operating Income	Week 5	Week 4	Week 3	Day 3 (Modules 5 and 6)
MODULE 6 Asset Recognition and Operating Assets	Week 6	Week 5	Skim
MODULE 7 Liability Recognition and Nonowner Financing	Week 7	Optional	Optional	Optional
MODULE 8 Equity Recognition and Owner Financing	Week 8	Optional	Optional	Optional
MODULE 9 Incorporate Entities	Week 9	Week 6	Optional	Optional
MODULE 10 Off-Balance-Sheet Financing	Week 10	Week 7	Skim	Optional
MODULE 11 Adjusting and Forecasting Financial Statements	Week 11	Week 8	Week 4	Day 4 (Modules 11 and 12)
MODULE 12 Cost of Capital and Valuation Basics	Week 12	Week 9	Week 5
MODULE 13 Cash-Flow-Based Valuation	Week 13	Weeks 9 and 10	Weeks 5 and 6	Day 5 (Modules 13 and 14)
MODULE 14 Operating-Income-Based Valuation	Week 14	Week 10	Week 6
MODULE 15 Market-Based Valuation	Week 15	Optional	Optional	Optional
MODULE 16 Comprehensive Case Analysis	Optional	Optional	Optional	Optional

APPLICATIONS ORIENTED

As instructors, we recognize that the financial statement analysis and valuation course is not directed solely toward accounting majors. Financial Statement Analysis & Valuation embraces this reality. This book highlights financial reporting, analysis, valuation, interpretation, applications and decision making. We incorporate the following financial statement effects template to train students in understanding the economic ramifications of transactions and their impacts on all key financial statements. This analytical tool is a great resource for students in learning analysis and applying it to their future courses and careers. Each transaction is identified in the “Transaction” column. Then, the dollar amounts (positive or negative) of the financial statement effects are recorded in the appropriate balance sheet or income statement columns. The template also reflects the statement of cash flow effects (via the cash column) and the statement of stockholders’ equity effects (via the contributed capital and earned capital columns). The earned capital account is immediately updated to reflect any income or loss arising from each transaction (denoted by the arrow line from net income to earned capital). This template is instructive as it reveals the financial impacts of transactions, and it provides insights into the effects of accounting choices.

Tomorrow’s graduates must be skilled in using financial statements to make business decisions. These skills often require application of ratio analyses, benchmarking, forecasting, valuation, and other aspects of financial statement analysis to decision making. Furthermore, tomorrow’s graduates must have the skills to go beyond basic financial statements and to interpret and apply nonfinancial statement disclosures, such as footnotes and supplementary reports. This book, therefore, emphasizes real company data, including detailed footnote and other management disclosures, and shows how to use this information to make inferences and decisions. This approach makes financial statement analysis and valuation interesting and relevant for all students.