ACCT/FINC 447 HOMEPAGE

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Financial Analysis for Finance and Accounting

The purpose of this course is to provide a systematic framework for the comprehensive analysis of financial information in the context of making a specific recommendation or decision. Two types of decisions will be the primary focus of analysis: (1) credit decisions (e.g., a specific commercial loan decision) and (2) investment decisions (e.g., recommend buying or selling a specific stock for an investment portfolio designed with a goal in mind such as retirement). Financial analysis skills are generic; that is, basic analysis tools can be used in many complex financial circumstances.

Emphasis in class will be on evaluating real world problems as found in Financial Analysis: A User Approach and Earnings Magic and the Unbalance Sheet: The Search for Financial Reality. Also see Earnings Magic page.

The internet is a primary source of financial information and will be used frequently (see Internet Resources).

What is financial analysis? Financial analysis is the conversion of financial data into useful information for decision-making. Therefore, virtually any use of financial statements or other financial data for some purpose is financial analysis and, essentially, is the primary focus of finance and accounting professionals. Financial analysis can be internal (e.g., decision analysis by a company using internal data to understand or improve management and operating results) or external (e.g., comprehensive analysis for such purposes as commercial lending or investment activities). The focus of this course is external financial analysis, although the basic techniques are applicable for internal analysis.

Given the scandals of the 21^st century, earnings management has become one of the most significant factors in financial accounting and a critical part of financial analysis. Corporate executives attempt to use operations and accounting to achieve some goal, the most obvious being meeting quarterly earnings forecasts. The misuse of accounting to achieve these goals is earnings manipulation. Detecting the use of earnings management (especially if manipulation is present) is a key component in determining the quality of earnings and, therefore, in properly evaluating the expected stock price (or intrinsic value).

The Value Chain of Information

What are we doing today? Calendar

Subscribe to the Wall Street Journal

Class Outline, Spring 2008

Contact me by email: g-giroux@tamu.edu

Statement on Scholastic Dishonesty

Grades: I finished the grading. The average on the final was 174. Send me an email with your UIN # & section & I will send you your grade.

Power point Slides:

Financial Analysis Slides

Earnings Magic

DEM Slides

Financial Analysis Projects

Financial Analysis Projects	Input Template-GP 1 (Excel)	Input Template-GP2 (Excel)
Input Template—GP3	Group Project 1--ADM	Group Project 1—Food (2)
Group Project 2--ADM	Group Project 2--ADM	Group Project 2—Food(2)
Group Project 3—ADM

Annual Reports & Proxy Statements

ADM 2007 AR	Conagra 2007 AR	SaraLee 2007 AR
Tyson 2007 AR	Whole Foods 2007 AR	Smithfield 2007 10-K
ADM 2007 Proxy	Conagra 2007 Proxy	SaraLee 2007 Proxy
Tyson 2008 Proxy	Whole Foods 2007 Proxy	Smithfield 2007 Proxy

Examples from Earlier Semesters

Group Project 1--Pepsico	Group Project 2--Pepsico			Group Project 3--Pepsico
Earnings Magic (GP3) Template (Word)	Group Project 1 -Conglomerates			Group Project 1-MMM
Group Project 2—Conglomerates	Group Project 2--MMM			Group Project 3—MMM
Group Project 3—Conglomerates
Group Project 1&2--Hotels		Group Project 1 & 2—Hilton Example	Group Project 1 & 2 Example (PC Industry)
Group Project 3—Hotels		Group Project 3—Hilton Example	Group Project 3—Pharmaceutical Example (from 2004)
Group Project 1--Food		Group Project 2--Food	Group Project 3--Food

Annual Reports & Proxy Statements

MMM 2006 10-K	ITT 2006 10-K		United Technologies 2006 AR
Textron 2006 10-K	Honeywell 2006 10-K		Raytheon 2006 10-K
MMM 2007 Proxy	ITT 2007 Proxy		UTX 2007 Proxy
TXT 2006 Proxy	HON 2007 Proxy		Citigroup 2006 10-K
Pepsico 2006 10-K	Kellogg 2006 10-K		General Mills 2007 AR
Campbell Soup 2006 AR	Kraft 2006 AR		Heinz 2006 AR
Pepsico 2007 Proxy	Kellogg 2007 Proxy		General Mills 2007 Proxy
Campbell Soup 2007 Proxy	Kraft 2007 Proxy		Heinz 2007 Proxy
Hilton 2005 10-K		Hilton 2006 Proxy	Marriott 2005 A/R
Marriott Proxy		Choice Hotels 2005 A/R	Choice Hotels 2006 Proxy
Harrah’s 2005 A/R		Harrah’s 2006 Proxy	Starwood 2005 A/R
Starwood 2006 Proxy		MGM 2005 A/R	MGM 2006 Proxy
Dell 2006 10-K		Coca-Cola 2005 10-K	Du Pont 2005 10-K
MMM 2005 AR		MMM 2006 Proxy	Citigroup 2007 10-K

Exams:

Exam Suggestions

Example Questions

Example Questions 2

DEM Example Questions

Note: Chapter 11 Web Quiz at the Wiley site: the correct answer to #3 is B.

Group Member Evaluation Sheet

Papers & Spreadsheets:

Dow Analysis:

Fed Watching by Glenn Hubbard: http://www0.gsb.columbia.edu/students/organizations/follies/media/EveryBreath.wmv

Accounting History: History of Financial Analysis
History Page
Timeline

Old Financial Analysis Projects:

Financial Analysis Projects	Input Template (Excel)	Earnings Management Template (Word)
Group Project 1 example	Group Project 2 example	Group Project 3 example
The Pharmaceutical Industry	Group Project 1—Retail Industry	Group Project 2—Retail Industry
Group Project 3—Retail Industry	Group Project 1—Pharmaceutical Industry	Group Project 2—Pharmaceutical Industry
Group Project 3—Pharmaceutical Industry	Group Project 1—Oil Companies	Group Project 2—Exxon Example