Course Syllabus

FI 305 Financial Reporting and Analysis

Course Description:
This course combines theoretical concepts underlying the presentation of financial statements with the
practical techniques of financial analysis. Topics include accounting processes; examination of the
components of the balance sheet, the income statement and the statement of cash flows; application
of the various quantitative techniques of financial analysis, such as ratio interpretation and EPS
evaluation; the meaning and significance of the auditor’s opinion, and current SEC reporting
regulations.
Students will be required to complete worksheet assignments using analysis techniques, prepare a
brief written industry report, participate in group discussions analyzing financial reporting issues, and
prepare and present a comprehensive financial analysis of a select company including a valuation of
the stock. By the end of the course, the student should be able to read a set of financial statements in
conjunction with other available information about the company’s industry, products and/or services,
calculate a fair market value of the stock using the residual income model, and formulate an opinion
on the validity of the current market value relative to the calculated intrinsic value.
Prerequisites: All students must complete FI300. In addition, students should have a good working
knowledge of basic accounting theory and principles. This course concentrates on more intermediate
and advanced accounting principles. The student will be required to comprehend, interpret, and apply
these more advanced principles to a target company as part of a valuation project.

Objectives of the course:

 Analyze financial statements using knowledge of the underlying accounting principles, and
financial analysis techniques.
 Demonstrate concisely presented financial results in written format.
 Recognize the impact of operating, investing, and financing decisions on financial statements and
how financial analysts interpret results.
 Identify SEC rules affecting financial reporting and disclosure.
 Apply the principles of business combinations and how they affect analysis of financial
performance and valuation of the company.
 Demonstrate the ability to prepare prospective financial information.
 Be able to present the financial results and position of a company relative to its industry and peer
group in oral and written format.

Required Text and Materials:

Wild, John J., K.R. Subramanyam, and Robert F. Halsey. Financial Statement Analysis.
New York: McGraw-Hill Irwin, 2001. The new 10th Assignment and problems are from the
10th Edition.
SEC Rules: Regulation FD, Regulation G, Sarbanes-Oxley Act. Provided in doc share

Grading and Homework Assignments

Students must complete worksheet and/or writing assignments as required. These assignments are
designed to help the student understand material in the text and prepare for the final term project.
These assignments are rigorous, and must be completed on a timely basis. Students who do not

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complete assignments as the course progresses will have a difficult time completing the final term
project. In addition, students must participate in group discussions weekly.
Grading will be done on a point system as presented below. Extra credit may be awarded for
specified assignments. These opportunities, if any, will be described in class. All assignments must
be turned in on the due date in order to be eligible for credit. No late assignments will be accepted.
Drop Box Date
Session Due Points % Total

Group Work None Weekly 300 15.0%

1.Industry Study 2 TBD 200 10.0%
2.Pro Forma Balance Sheet 5 TBD 200 10.0%
3.Exam 8 TBD 200 10.0%
4.Pro Forma Income Statement 7 TBD 200 10.0%
5.Prospective Analysis 12 TBD 200 10.0%
6.Executive Summary Work 14 TBD 100 5.0%
7.Term Paper 15 TBD 600 30.0%

2,000 100.0%

1) Worksheet Assignments
All worksheets must be prepared using Excel and the basic format techniques described below. As a
financial professional, presentation of numbers is an important skill. Management is more likely to
review your work if it is presented in a clear, concise format. Part of your grade will be based on the
clarity of your work throughout the term.
 The print preview scale should be at least 70%.
 Worksheets should be clearly labeled with appropriate descriptive headings.
 Columns should have proper headings and be segregated with space columns with a width of at
least 2.0.
 Column totals should have double underlines.
 Numbers should all have a “,” (comma) denoting thousands and should be rounded to at least the
nearest dollar.
 Negative amounts should be in parentheses.
 Spelling should be accurate.
 Abbreviations should be defined or clearly understood.
 All schedules should indicate the date or period of time for the data presented and the date the
schedule was prepared.

Assignment 2: Prepare a pro forma balance sheet for your company using the worksheet format
prescribed in class. You will need to adjust the balance sheet for any off balance sheet
assets/liabilities or other net worth items deemed necessary, and then answer the assigned questions.
Assignment 3: Using the 5-year income statement history for your term project company, prepare a
preliminary pro forma income statement. Use the most recent income statement for the company and
make the appropriate adjustments for transitory and non-operating items. The resulting income
statement along with forecast assumptions will be used for future value computations. Be sure to
include the 5-year income statement history for your company with the assignment when submitted.
Assignment 4: Prepare a 5-year prospective analysis for your term project company. The end result
will be a preliminary value for your company. Use the residual income model discussed in class to
value your company. Follow the steps prescribed in the lecture handout.

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 2) Writing Assignments
Grading will be based upon the student’s a) knowledge of material, b) analytical skills, and c) writing
skills. Students should write concise responses to these assignments using proper grammar, spelling
and formats prescribed in class.
Assignment 1: The purpose of this assignment is to gather information for your term project regarding
the industry sector and general economy, which might impact the valuation of your company. Your
goal is to prepare a 2-3 page summary presenting this information.
Term Project/Executive Summary 5&6: Details regarding this paper and the related executive
summary are described below. Analytical data will be prepared throughout the course, which will be
used to compile the paper.

3) Group Discussions
Group projects will be assigned weekly throughout the term in anticipation of group discussions during
the following week. No written submissions are due, however, students are expected to prepare in
advance for these sessions by reviewing assigned materials. You will simply be asked to participate in
discussions.
 On-Line Discussions: During an on-line, threaded discussion session, you must participate in
group discussions by offering opinions regarding the questions raised for the week.
 You must make a minimum of three discussion entries throughout the week on at least 3
different days, not just at the end of the week.
 Your first response must be posted by Thursday of the session week and by Sunday, no
later than 6:00 pm/PST. You must respond to at least three classmates’ postings. You
should post a substantive response, which is more than saying “I agree with your response” or
“good answer”.
 You should be able to offer an opinion to the discussion by sharing a related experience,
commenting on others’ experiences, or taking an idea being discussed and offer a different
perspective/approach on the issue.

Group discussion postings will be evaluated as follows:

Points Skills

21 - 25 Contributions are prompt, timely, relevant and self-initiated. Remarks are

posted freely on all issues throughout the course.

16 - 20 Student generally keeps up with the discussion; needs an occasional

prompting to contribute and may participate in some discussions more
than others.

6- 15 Participation is spotty. You pick and choose topics to get involved in and
offer short perfunctory postings when prompted. You take limited initiative.

0-5 Student rarely participates freely; makes short, irrelevant remarks.

General Discussions (On-line): Students can initiate discussion and ask questions about the text
material and homework assignments in the “General” discussion area on the cyber campus.

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 4) Term Project
During the first few weeks of class, students will select a company to analyze, investigate and evaluate
throughout the course. This company must be a public company from a non-regulated industry and
there must be at least 5 years of financial statement information available. Students will study this
company throughout the course. They will analyze its financial health and ultimately compute its value
using techniques and analytical tools learned in class. Most homework assignments will be aimed at
this target company.
In lieu of a final exam, students will prepare a comprehensive written report with financial exhibits.
This report will include an executive summary, a detailed evaluation of historical financial results, an
analysis of intrinsic value relative to the market, and conclusions regarding credit, solvency, and value
of the company. A detail outline of specific requirements will be provided to the class on-line.
In addition, students must present their executive summaries to the class. A format will be provided
for this presentation. These summaries will be available to all class members during the final 2 weeks
of the course. Students will be asked to review these summaries and answer a series of prescribed
questions in a group format. A total of 100 points will be awarded for this group work and the written
summary.

Instructor’s Biography:
Gary Mingle C.P.A. is an investment advisor and is a consultant to various for profit and not-for-profit
organizations. Gary has worked as a CEO/ CFO for public and private firms and has been involved in
numerous public and private debt and equity offerings.
Gary started his career at Coopers & Lybrand and has a Bachelor of Science degree in mathematics,
MA in accounting, MST in Taxation, and an MBA from the University of Chicago and is currently
finishing his dissertation in the doctoral program at GGU.

Contact Information:
Email: gary.mingle@hamlinharkins.com
Fax: 510.6473625
Cell: 773.255.9955 (Chicago Number)
Work: 510.647.5089 (Extension 1)

Course Design:
The course is being updated to include international accounting standards.

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 Course Outline
Note: Please see due dates and drop boxes for assignments in the table above.

Week Class Activities Assignments

1 (1) Overview financial statement analysis
(Analysis process, dissection of financial
statements, capital market review)
 Introduction to course
 Read chapter 1 and review chapter 12
(8th Edition) or 11 (9th Edition) prior to
the first session. Assigned problems
 Assigned Problems

 Lecture  Skim the Sarbanes Oxley Act and

Regulation G. Read the lectures.
 Group 1-. Financial statement issues for
Luminent.  Group - Sarbanes Oxley Act.
 Group - Regulation G

2 Recent SEC Regulations  Read chapter 2, Presentation

Problems and skim the Fair Disclosure
(Overview of Sarbanes Oxley, SEC FD Act and
Act. Read the lectures.
Reg G)
 Lecture- Sarbanes  Writing1: Industry Analysis.

 Lecture-Regulation G  Group: Fair Disclosure Act

 Group 2: Sarbanes Oxley discussion  Group Loose Lips

 Group 3: Regulation G discussion

3 (2) Financial reporting and analysis  Read chapter 3 problems
presentations and review Enron
(Reporting environment, public reporting
financial statements.
disclosure requirements from IR standpoint,
accounting purpose, accruals)  Group: Enron financial statement
 Lecture-FD concerns

 Lecture- Reporting Environment

 Group: FD discussion
 Group: Loose Lips
4 (3) Analyzing financing activities  Read chapter 4 and presentation
problems
(Capital leases, pension obligations,
commitments, contingencies, off balance sheet  Group: Enron off balance sheet issues
financing)
 Lecture
 Group 5- Enron Reporting Issues
5 (4) Analyzing investing activities  Read chapter 5. Problems 7
presentation
(Current assets, capitalization vs. expense,
investment securities, valuation of long-lived  Worksheet 2: Off balance sheet
assets, depreciation, intangible assets) liabilities for your target company
 Lecture  Group : Ace Consulting
 Group 6-Present Enron off balance sheet
issues.
6 (5) Investing activities-special topics  Read chapter 6. Problems and

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Week Class Activities Assignments
(Consolidations, equity method, purchase presentations
accounting, foreign currency, international
accounting standards)  Group : Stock Options

 Lecture
 Partnership investment account analysis
 Group 7- Ace Consulting
7 (6) Analyzing operating activities  Read chapter 7. Problems &
presentations
(Revenue recognition, deferrals, employee
benefits, interest & taxes, nonrecurring items)  Worksheet 2: Pro forma income
 Lecture statement

 Review % complete project accruals.  Group : Enron cash flow concerns

 Group 8: Stock Options  Prepare for exam.

8 (7) Cash flow analysis  Read chapter 8. Problems &

presentations
(Constructing the CF statement, limitations in
reporting, cash flow vs. NOI, free cash flow)  Group: Cookie Jar Accounting
 Lecture
 Group: Enron cash flow

9 Mid-Term Open Book Exam

10 (8) Return on invested capital  Read chapter 9. Problems &

presentations
(Return on debt & equity, return on assets,
financial leverage  Group: Income Statement Checklist
 Lecture  ROI analysis (term paper)
 Cookie Jar Accounting
 Group: Balance Sheet Checklist work
11 (9) Profitability analysis  Read chapter 10. Problems &
presentation
(Gross profit, revenue, expense and variation
analysis, tax expense)  Group: Checklist work-additional items
 Lecture  Group: Peet’s Coffee Analysis
 Mid term results  Profitability Analysis- term paper
 Group: Income Statement Checklist
12 (10) Prospective analysis  Read chapter 11. Problems &
presentations
(Short-term/long-term forecasting)
 Lecture  Worksheet 3: 5-year prospective
analysis for your target company.
 Review results of mid-term.
 Group: Credit Analysis
 Group: Peet’s Coffee Analysis
 Group: Checklist-Additional items

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Week Class Activities Assignments
13 (11) Credit analysis – ONLINE  Read chapter 12. Problem &
presentations
(Liquidity, capital structure and solvency)
 Lecture  Credit analysis (Term paper)

 Group: Credit analysis  Group 13: Analysis and Valuation

14 (12) Equity analysis and valuation  Executive summaries due

(Earnings persistence, earnings based
valuation, earning power and forecasting)
 Lecture
 Group- Analysis and valuation
15 Final Analysis  Written projects due
 Student projects

16 Final Analysis  Group: Executive Summaries

 Student projects

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