© 2000 John Petroff 

 

 

FINANCIAL ANALYSIS

 

[These pages constitute a preliminary edition of the course as of January 2001. The content is not yet entirely edited. Additions of more graphs, examples, questions, assignments, citations and new findings are planned. Your comments and corrections are welcome. Those most useful will be incorporated in Comments section of each chapter. Continuous upgrading and updating of this material is our goal. I guess, our work will never be finished.]

 

Content:

This is an advanced professional course intended for individuals working in banks, investment companies, stock brokers or large corporate finance departments. There are three distinct parts: the first four chapters review approaches to valuation of financial assets; the next nine chapters cover one aspect of the firm operations and draw conclusions on the implications for the value of the firm to investors; the last two chapters incorporate economic forecasting to assessment of firm's strategy. There is a general theme repeated through all the chapters that there are many different purposes of analysis of a company's financial condition and the focus changes accordingly, but the methods remain essentially the same. All well known analytical methods are presented with examples showing their use, and with, just as importantly, a discussion of their limitations.

Objectives:

After completing this course a student should
- be able to take certification exams to become a financial analyst
- understand the context in which financial analysis is conducted
- be familiar with all the commonly used techniques of financial analysis
- know the importance of external economic and industry factor, and how to incorporate them in the analysis
- be able to make recommendations on decisions to buy or sell shares
- adequately manage with the shortcomings of accounting numbers
- appreciate the usefulness and limitations of statistical inference techniques
- know how to analyze all major investment and financial decisions

Organization of the chapters:

The sequence of the topics is

Chapter 1: Introduction
Chapter 2: Fundamentals of Finance
Chapter 3: Value Concepts
Chapter 4: Investment Strategies
Chapter 5: Analytical Tools
Chapter 6: GAAP
Chapter 7: Old Accounting
Chapter 8: Liquidity
Chapter 9: Sales
Chapter 10: Fixed Assets
Chapter 11: Capital Structure
Chapter 12: Capital Sourcing
Chapter 13: Earnings
Chapter 14: Industry Analysis
Chapter 15: Economic Analysis

The list of chapters always appears on the left side of the screen so that one can quickly move from chapter to chapter when necessary.

Design of content:

The course presupposes a prior knowledge of finance, including advanced courses in investment, accounting and corporate finance. If a student has the prerequisites, the work expected to complete this course is equivalent to a full 15 week semester advanced university course. If the prerequisites are somewhat superficial, a student should expect the work load to double to the equivalent of two semesters of advanced university courses.

Studying approach:

One would normally read the text starting from chapter 1 and moving to each subsequent chapter as the material builds on concepts presented in previous chapters. One is urged to take careful notes as explained in studying recommendations.

After reading the text, the student is urged to use the review questions, assignments and citations present at the end of each chapter. The review questions test the knowledge of each concept in the chapter with the ability to link back to the chapter if it is not clear why the correct answer is what it is.

Evaluation:

To receive recognition for the work performed in this course, an instructor is necessary because of the need to evaluate student work in cases and assignments. The instructor will set the grade composition, choose the assignments and cases, grade student work and give advice. A written final exam is required for this course. It may or not be written and proctored by the instructor. Or a final exam can be supplied by PEOI and PEOI will arranged for testing at a testing service location. In the later case a fee for the cost involved will have to be charged.

The final grade is calculated automatically on the basis of grades received and grade composition set by the instructor at the outset of the course. PEOI will award a certificate of course completion if the grade is 75/100 or better, and enter the award of course completion in its publicly accessible records. The record will show the overall grade received and the questions asked on the final.

Although no comprehensive automated test is currently (1/1/2001) available for this course, it is in preparation and will be incorporated at a later date. One should note that the comprehensive test does not allow linking back to the underlying text. Although the questions and the answers in all tests are randomized to avoid memorizing correct answers (rather than underlying concepts), this comprehensive test is inferior to review quizzes for learning purposes. The comprehensive test is only designed for a quick overall evaluation. Moreover, because the test taking is not proctored and the student has use of his/her notes, the reliability of the grade has some limitations. In no case will the automated test represent more than 35% of the grade.

See typical grade composition.

Registration recommended:

We strongly recommend that you register for this professional course if you plan to make any serious use of studying this course. By registering you will have two major useful outcomes. First, once you sign in, the time and grade in each chapter will be recorded in a personal record seen only by you and your instructor: this record will show your progress in the course. Second, as mentioned above, award for completion of the course will be entered in the public record and give you the ability to use this grade as proof of knowledge of the course content. Note that an instructor is necessary for this course.

To register for a course simply fill out the registration form. There is no fee. The information is kept strictly confidential. The only information that is officially publicly accessible, is the one present in Public Records which you may see for yourself.

Questions or comments:

Your comments, corrections and suggestions are most welcome: please email them to peoi.org or you may contact us directly.

To Start:

Proceed to Chapter 1: Introduction