BE-414 Business Valuation

The course is connected to the following study programs

• Master's Programme in Accounting and Auditing

Teaching language

English

Recommended prerequisites

Bachelor level courses in Accounting, Investment and Finance

Course contents

This course will examine how the underlying (or theoretically "correct") value of firms can be estimated. The course integrates the learning from finance and accounting courses. Specifically, it shows how the structure of accounting can be exploited for valuation purposes. While traditional finance courses view investors as relatively passive, accepting prices as fair value, this course takes an activist's perspective. Active investors exploit what is perceived to be mispricing in the market to earn superior returns.

The course's primary focus is on earnings forecasting and methods for converting forecasts to a valuation. While valuation texts often use discounted cash flow analysis to value enterprises, analysts typically forecast earnings to indicate business value. Earnings, appropriately measured, give a better indication of the value generating process of an enterprise. The course shows how the analysis of earnings prospects leads to a firmer understanding of fundamental value. As earnings differ from cash flow because of accrual accounting, the course lays out how accruals can help in understanding a business and its value

Learning outcomes

On successful completion of this course the student should be able to

• analyze historical performance, including reorganizing a company´s financial statements to reflect economic performance

• forecast performance by preparing business forecasts/pro forma financial statements

• use simple valuation techniques such as asset based valuation and the method of comparables

• demonstrate how financial statements prepared in accordance with internationally accepted accounting standards are used in valuation

• apply fundamentals such as dividends, cash flows, earnings and equity book value to compute equity value/company value

• analyze and provide evidence that the fundamental valuation models in general are identical

• provide evidence that company value is unaffected of the accounting methods employed

• link a company's valuation multiples, such as price/earnings ratio and price--book ratio, to the core drivers of its performance

• trade on fundamental information

• demonstrate how preferences for sustainable investment choices can affect investors’ stock composition.

Examination requirements

Approved compulsory assignment. Further information will be given in Canvas at the start of the semester.

Teaching methods

Lectures, and individual/group work. Estimated workload is about 200 hours.

Evaluation

The person responsible for the course, in consultation with the student representative, decides the method of evaluation and whether the courses will have a midterm- or end of term evaluation, see also the Quality System, section 4.1. Information about evaluation method for the course will be posted on Canvas.

Admission for external candidates

No

Assessment methods and criteria

4-hour written examination with letter grades.

Due to grade requirements for state authorised auditors, a regular examination will be held both autumn and spring.

Reduction of Credits

This course’s contents overlap with the following courses. A reduction of credits will occur if one of these courses is taken in addition:

Course	Reduction of Credits
BE-407 – International Accounting	7.5
IN-5600 – Financial Accounting and Analysis in an International Perspective	7.5
IN-5600 – Accounts reporting and analysis in an international perspective	7.5
BE-504 – International Accounting	7.5