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.
4-hour written examination with letter grades.
Due to grade requirements for state authorised public accountants, a regular examination will be held both autumn and spring.
Handelshøyskolen ved UiA