MOØ213 Financial Management II

Contents and structure

The main aim of this course is to provide the candidate with a tool for assessing the financial position of an enterprise. The course combines financial statements analysis, business strategy, microeconomic theory, finance and behavioral finance. This will be done within a framework of enterprise valuation. The course provides insight into financial statement analysis as source of information, performance measurement and issues related to measurement problems. The course provides insight into how financial information may be misleading or misinterpreted. Further the course applies business strategy analysis and microeconomic theory to understand differences in performance between industries and players within an industry, sources of competitive advantages and the persistency of such. Various valuation techniques, such as pricing models and use of multipliers are presented. The course deals extensively with risk assessment, uncertainty and prediction problems. Under the topic of accounting-based risk measurement, models for bankruptcy risk prediction and credit scores are presented, as well as studies that focus on accounting-based measurement of systematic risk. Key topics:

- Accounts as a source of information/financial statement analysis

- Measurement errors 

- Earnings management, misleading information and bias 

- Sources of and measurement of competitive advantage

- Competitive forces, normalisation

- Prediction problems, uncertainty

- Systematic and unsystematic risk 

- Financial modelling

- Valuation

- Bankruptcy risk prediction and credit scores 

- Analysis of profitability, solidity and liquidity

- Financing, capital structure

Learning Outcome

On completion of the course the candidate has gained insight into the use of financial statements as a source of information.

On completion of the course the candidate:

• can extract information from financial statements for the purpose of valuation or analysis of profitability, solidity, liquidity and financing.
• can identify sources of measurement problems, identify quality of earnings issues and has a clear understanding of the difference between earnings and cash flow, profitability and internal rate of return
• understand the difference between systematic and unsystematic risk and is familiar with techniques for assessing and considering risk
• is familiar with cash flow prediction and modelling
• can apply different valuation techniques

On completion of the course the candidate can discuss and assess the financial position of an enterprise.

Entry requirements

None.

Recommended previous knowledge

The compulsory courses in business administration and financial accounting and analysis included in the bachelor program in finance and administration or equivalent.  In particular the students should be familiar with:

• Statistics; OLS Regression, probability distributions, stochastic variables
• Financial accounting; the concept of accrual accounting, the DuPont model, group accounting (consolidation)
• Finance; capital asset pricing model

Teaching methods

Lectures and assignment reviews. The student must actively participate in the classroom sessions and must be prepared to study parts of the learning content independently or in study groups.

Compulsory learning activities

The students must be prepared to submit a written solution to an exercise and also to present their solution in class. 

Assessment

Written examination, 5 hours. The examination may be digital.

Time and place for the examination will be announced at Studentweb.

Grading scale is A-F where F is fail.

Examination support material

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