Securities and Investment Analysis

Below is the synopsis for the Securities and Investment Analysis course (Michaelmas Term). Each session lasts one hour or two hours.

0. Introduction to the Course

1. Financial analysis

1.1 Section 1: Introduction to Financial Analysis (1 hour session + 2 hours session)

Introduction to financial analysis.

• The concepts introduced in this session are loosely based on Chapters 1 to 3 of The Analysis and Use of Financial Statements [White, Sondhi, and Fried (1994)].
• The lecture has however a less technical emphasis and is embedded in a stronger economic framework.

Case Study: America Online Inc.

2. Securities Valuation

2.1 Session 2: Dividends, Free Cash Flows and Earnings Valuation Models (2 hours session + 1 hour session)

Introduction to dividends, free cash flows and earnings valuation models. This session is loosely based on:

• Chapter 19 of The Analysis and Use of Financial Statements [White, Sondhi, and Fried (1994)] which is mandatory reading, and
• Chapter 7 of Introduction to Business Analysis & Valuation [Palepu, Bernard, and Healy (1996)]
• An application of dividend discount models can be found in A Realistic Dividend Valuation Model [Hurley and Johnson (1994)].
• Some evidence on earnings based valuation models can be found in What Determines Price Earnings Ratios? [Beaver and Morse (1978)].
• Practical approaches to valuation models based on free cash flows can be found in Creating Shareholder Value: The New Standard for Business Performance [Rappaport (1983)].
• Chapter 6 of Introduction to Business Analysis & Valuation [Palepu, Bernard, and Healy (1996)]., and
• Valuation: Measuring and Managing the Value of Companies [Copeland, Koller, and Murrin (1994)].

Case Study: The Computer Industry in 1992