Financial Statement Analysis by sammyc2007


									The Iowa Electronic Markets

Financial Statement Analysis
Curriculum using the IEM
Prepared for the Fall 2000 IEM*IDEA/NSF Conference


Thomas A. Rietz, University of Iowa Marilyn Dutton, North Carolina Central University Cynthia J. Brown, University of Texas-Pan American

September 2000

Teaching Objectives
Financial Statement Analysis
1. Financial statements are the “language” of business. 2. Financial statements show the current state of the firm. 3. Ratios are used to evaluate firm performance.

Access balance sheet and income statements from the web
Students should be able to: 1. Find financial information on publicly traded companies on the web.

Compute, understand and interpret some common ratios
Students should be able to: 1. Compute common financial ratios from a company’s financial statements. 2. Understand the performance objectives measured by the ratios. 3. Interpret the financial ratios and evaluate the company’s performance relative to industry standards.

Use DuPont analysis to predict P/E and valuation ratios
Students should be able to: 1. Utilize financial ratios to perform DuPont analysis. 2. Use DuPont analysis to predict valuation ratios.

Trade in IEM based on earnings and valuation predictions.
Students should be able to:

1. Use current information to form expectations on the firm’s future financial performance. 2. Combine current information with analysis of past financial performance to trade in the IEM Computer Industry Returns market. 3. Observe the relationship between a firm’s financial performance and its share price and returns.

Lecture Outline
Financial Statement Analysis
1. 2. a. b. 3. a. b. c. d. e. 4. 5. 6. 7. Introduction Financial Statements Balance Sheet Income Statement Financial Ratios Liquidity Operating Debt Profitability DuPont Predicting valuation ratios Role of Information in Share Price Combining predictions and information to trade in IEM Conclusion

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