SYLLABUS

UCLA Anderson School of Management

Syllabus - Management 126 - UCLA - Summer 2014 6/2/2014
Course Title Financial Statement Analysis
Course Number Management 126
Quarter Summer 2014
Instructor Danny S. Litt
Meeting Times Monday and Wednesday, 8:30am-10:50am
Meeting Dates June 23, 2014 July 30, 2014
Final Exam Date Wednesday, July 30, 2014, 8:30am10:50am
Class Location Rolfe 3126
UCLA Office Anderson D406
UCLA Office Phone Number 310-825-8828 (message)
UCLA Office Hours Monday - Thursday, 7:30am or by appointment
E-mail address [email protected] (reference Management 126)

COURSE DESCRIPTION
Lecture, two hours and twenty minutes. Requisite: course 120B. Letter grade or
P/NP.
Comprehensive study of concepts and procedures used to interpret and analyze
balance sheet, income statement, and statement of cash flows. Calculation and
interpretation of financial ratios and credit analysis. Valuation theory using both
discounted cash flows and residual income model.
Students can no longer drop courses during summer session at the last minute. In
order to drop the courses they will have to drop during the first week of summer.
COURSE GOALS AND OBJECTIVES
This course is designed to prepare you to effectively interpret and analyze financial
statements. The purpose of this analysis is to assist you (the investor, the banker,
the shareholder, the companys CEO or CFO) in your investment and credit
granting decisions. The course extends your knowledge in financial reporting by
introducing you to the quality of financial information and the factors that affect
this quality, such as the flexibility that companies have in applying existing
accounting principles and the incentives of management to manage earnings.
We will examine in detail methods of fundamental analysis of business entities and
the various approaches for valuation. The analysis will be carried out from the
perspective of both the outside security analyst and corporate financial analyst.
The course is of interest to those contemplating careers in investment banking,
security analysis, consulting, public accounting, and corporate finance. It will also
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help in personal investing. The course will be in the form of lectures, discussions,
cases, and exams.
TOPICS INCLUDE
Structure and analysis of the three major accounting financial statements:
balance sheet, income statement and cash flow statement.
Computation and interpretation of financial ratios with a view towards using
them to build a financial planning model of the firm.
Effect of typical strategic objectives including such financial targets as sales
increases, capital asset additions, working capital needs, return on
investment, profitability, etc., on the structure of the firm's financial
statements.
How to integrate accounting, finance, and economics into the strategic
management process.
Prior to each class, you should read the assigned chapter(s) and course reader
material, review the exercises and prepare the case. The cases and exercises can be
submitted on an individual or group basis. The title page must list the case name,
the students name(s), and ID(s).
REQUIRED COURSE TEXT
Financial Statement Analysis and Security Valuation, 5
th

Edition
Stephen H. Penman
McGraw-Hill Irwin, 2012
ISBN: 0-07-802531-1 / 978-0-07-802531-0
REQUIRED COURSE READER
The course reader will be essential for every class. Be sure to bring it to all the
class meetings:
COURSE READER MATERIAL
310.443.3303
1081 Westwood Blvd. ENTRANCE on Broxton Ave.
South of Wayburn & City of LA Parking on Broxton Ave.
RECOMMENDED READING
Current daily issues of the Wall Street Journal.
Current issues of Business Week Magazine.
PREREQUISITES
The completion of Management 120A, 120B and 130A and the acceptance into the
accounting minor is required for admission to the class. The instructor must
approve exceptions.
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GRADING
Points Percentage (%)
Exam 1 100 20
Exam 2 100 20
Participation 100 20
Homework Assignments (10) 100 20
Cases (8) 100 20
Total 500 100%
Exam 1 and 2 will cover the material preceding each exam and are anticipated to
last two hours. Exam 2 is cumulative, with emphasis on the later chapters. There
will be no makeup exams.
Each student is expected to attend regularly and be prepared to discuss the material
covered that day. Each student is individually responsible for completing the
required assignments prior to the beginning of class and for bringing the
assignment to class. Students will be asked to explain their solutions of the
homework assignments to the class. These homework assignments will not be
submitted. There may be pop quizzes.
GRADING SCALE
The grades are indicators of the relative knowledge and skill of a student as
compared to the performance of other students in the course. The grades in the
course will be adjusted so that the mean or average in the class will be a B; a grade
of approximately 3.00 or higher. There will be no makeup exams.
Grades are almost completely relative, in effect ranking students relative to
others in their class. Thus extra achievement by one student not only raises his
position, but in effect lowers the position of others. James S. Coleman
The grade you receive is the one you earn relative to the rest of the class. It is not
the grade you need to get into the accounting minor or the grade you think you
deserve or desire.
PARTICIPATION
The success of the class depends on participation and therefore class presence is
absolutely required. Excessive absences will reduce your grade. If you have a
reason to miss class, you must notify me in advance. You must be prepared for
each and every class, without exception.
HOMEWORK ASSIGNMENTS
The homework for each chapter will be discussed during the class. The homework
will be submitted at the start of the class. You must make a copy for your class
discussion and participation. There are no late submissions. The ten assignments
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are worth 10 points each for a total of 100 points. The homework assignment for
Chapter One is due the second session.
CASES
There will be eight (8) cases during the quarter; approximately one per session.
Cases will be submitted and discussed during the class session; the first four cases
are worth 10 points each and the last four are worth 15 points each for a total of
100 points. Grading will be based on the discussion of substantive issues,
resolution of any problems, etc. Most cases should utilize spreadsheet analysis.
The cases will be turned in at the start of the class. You must make a copy for your
class discussion and participation. A group(s) will present their results to the class.
There are no late submissions.
The students will organize themselves into groups of three to six during the first
class meeting. Each group will submit solutions to the case assignments. Once
groups are formed, case write-ups are a group responsibility. High quality is
expected, in both content and form. Content includes specificity, completeness,
clarity, grasp of significant issues, and originality. Form includes grammar,
punctuation, spelling, conciseness, organization, and legibility. Cases may require
significant computer analysis, e.g. Excel or Lotus spreadsheets.
Each group must work together jointly, not by dividing the work into parts. If one
or more group members do not participate, omit their names from the group paper
or as Donald Trump says: Youre fired. Each groups members are urged to
study together, assist each other, and learn from each other. This approach
generally improves an individuals learning. Each individual is ultimately
responsible for performing, however, so the group must evaluate the members of
its group with respect to work, effort and performance.
POLICY ON INCOMPLETE GRADE
The grade Incomplete (I) may be assigned only in cases where:
The students work is of passing quality at the time the incomplete grade is
granted and only a small portion of the coursework remains unfinished.
The coursework has not been completed due to extraordinary and verifiable
circumstances (such as illness, death in the immediate family, or other
similar situations).
The student agrees to complete the coursework as soon as possible within
the following quarter. If the coursework is not completed by the following
quarter, the incomplete grade will automatically be converted to an F.
The instructor agrees to give a grade of incomplete and evaluate the
remaining coursework if turned in during the following quarter.
The AGREEMENT FOR ASSIGNMENT OF A GRADE OF
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INCOMPLETE form must be signed by both the student and the instructor, and
approved by the Director of the Undergraduate Accounting Minor Program.
If a student has not completed the course, does little or no work during the quarter
and does not have the appropriate good cause, the students grade will be posted as
F, NP or U as appropriate.
WEB SITE
The website for our class was created in Moodle, an open source Course
Management System (CMS). Moodle is the new CMS that was chosen by UCLA
to replace the different systems that are used across the school.
Our course can be accessed via the following methods:
CCCLE website, http://ccle.ucla.edu - look under the Management category,
Summer 14 folder for our class
(https://pilot.ccle.ucla.edu/course/view/141A-MGMT126-1 )
Registrar website, www.registrar.ucla.edu look under Schedule of Classes.
In the course detail there is a link to our class.
Students who have enrolled in the class can find the course website under
My UCLA, http://my.ucla.edu/
INFORMATIVE WEB SITES
http://www.accountantsworld.com
http://moneycentral.msn.com
http://finance.yahoo.com/
http://www.cpaclass.com/
EMAIL POLICIES
Emails are a useful and expeditious communication tool. I attempt to respond to all
emails within 24 hours, including on weekends. I firmly believe that it is proper
etiquette for me to respond to all emails promptly. However, a few individuals
view email as an around-the-clock substitute for attending class or interacting with
classmates. As such, before sending an email, please consider:
1. Administrative issues and topics discussed in a class you missed should be
directed to a fellow classmate.
2. Unless a matter is urgent, please save your inquiry for our next class session
or for office hours. Personal conversations allow me to give you a thorough
answer, gain an insight into your conceptual struggles, understand any faulty
underlying assumptions, and diagnose your problem more accurately.
3. There are many subjects that are too sensitive to discuss over email mainly
because misinterpretation could have serious consequences. Some topics that
should generally be resolved outside of email are:
Disciplinary action
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Conflicts about grades or personal information. I am happy to discuss
your grades in person. Privacy laws prevent me from using email.
Concerns about fellow classmates/workmates
Complaints
4. If your email concerns grading records or the textbook, please assume that I
may not have these items with me when I receive your email.
5. Be concise and to the point. Do not make an e-mail longer than it needs to
be. Remember that reading an e-mail is harder than reading printed
communications and a long e-mail can be very discouraging to read.
6. Please state discrete questions that call for succinct answers. If you pose
more than one question, please number your questions, so they can be
referred to them by number.
7. Read the email before you send it. A lot of people don't bother to read an
email before they send it out, as can be seen from the many spelling and
grammar mistakes contained in emails. Apart from this, reading your email
through the eyes of the recipient will help you send a more effective
message and avoid misunderstandings and inappropriate comments.
If your email meets the above criteria, be sure to type UCLA and the course
number in the subject heading of your email. Otherwise, it will end up in my
junk mail folder and go unread.
LESSON PLAN
The following is our working schedule for the course. If there are any changes, I
will announce them in class.
Class Date Topic & Assignments Discussed Cases Due
1 6/23/14 I ntroduction to I nvesting and
Valuation

Readings: Chapter 1
Exercises: E1.1, E1.2, E1.3, E1.5

2 6/25/14 I ntroduction to the Financial
Statements
M1.1 America Online, I nc.
Readings: Chapter 2
Exercises: E2.1, E2.2, E2.3, E2.5,
E2.10


3 6/30/14 How Financial Statements Are
Used in Valuation
M2.1 Kimberly-Clark
Corporation
Readings: Chapter 3
Exercises: E3.1, E3.2, E3.3, E3.5,
E3.6, E3.7

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Class Date Topic & Assignments Discussed Cases Due

4 7/2/14 Cash Accounting, Accrual
Accounting and Discounted Cash
Flow Valuation
M3.2 Nifty Stocks?
Readings: Chapter 4
Exercises: E4.1, E4.2, E4.3, E4.4,
E4.5, E4.6, E4.8, E4.11


5 7/7/14 Accrual Accounting and Valuation:
Pricing Book Values
M4.1 Coca-Cola Company
Readings: Chapter 5
Exercises: E5.1, E5.2, E5.3, E5.4

6 7/9/14 Exam 1 (Chapters 1 5) M5.2 PepsiCo and Coca-
Cola

7 7/14/14 Accrual Accounting and Valuation:
Pricing Earnings

Readings: Chapter 6
Exercises: E6.5, E6.6, E6.7, E6.8

8 7/16/14 Valuation and Active I nvesting M6.1 PepsiCo and Coca-
Cola
Readings: Chapter 7
Exercises: E7.6, E7-7, E7-8, E7-9

8 7/21/14 Viewing the Business Through the
Financial Statements
M7.1 Challenging the
Market Price: Cisco
Systems, I nc.
Readings: Chapter 8
Exercises: E8.5, E8.6

10 7/23/14 The Analysis of the Statement of
Shareholders Equity

Readings: Chapter 9
Exercises: E9.5, E9.6, E9.7, E9.8

11 7/28/14 The Analysis of the Balance Sheet
and I ncome Statement
M9.1 Microsoft Corporation
Readings: Chapter 10
Exercises: E10.5, E10.6, E10.7
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Class Date Topic & Assignments Discussed Cases Due

12 7/30/14 Exam 2 (Chapters 6 10)
CLASS ETIQUETTE
No cell phones or beepers are allowed in the classroom. Please turn them off!! No
food or drink (other than water) is allowed in the classroom.
DISCLAIMER
This syllabus may change from time to time to accommodate changing
circumstances. Every effort will be made to alert students to changes that occur in
a timely manner. While the material will be covered in the order presented in the
schedule the actual timing may change from week to week as the course
progresses.
FINANCIAL CALCULATOR
It is highly recommended that you use a financial calculator. An HP 10B series, HP
12 series, HP 17 series, Sharp EL-733A or Texas Instruments BA II Plus financial
calculator is acceptable. You may not use your cell phone or your PDA. You
may use a graphing calculator, if the memory has been cleared. If you have an
iPhone, you can download an HP12C calculator but may not use the text
messaging feature. Other instructors may have different policies. It is important to
realize that financial calculators are normally required on the job. The net
present value of this investment is extremely positive. If you are interested in
finance, real estate, financial services, or accounting you should really consider
investing in the HP17 calculator; it is a professional level machine that you may
well use for the next decade or more.
Free training for HP calculators:
http://www.hp.com/calculators/segments/students.html