Course Outline

Course Name: Business Analysis and Valuation

Course Code: RSM 2212
Year, Term: 2016, Term 1
Instructor Name: Francesco Bova
Instructor Office: 536
Instructor Phone: 416-978-3985
Instructor Office Hrs: TBD
Instructor Rotman email: Francesco.bova@rotman.utoronto.ca
TA name(s) and email(s):
Mahfuz Chy at mahfyzchy14@rotman.utoronto.ca
Selina Yu at selinayu17@rotman.utoronto.ca

Table of Contents
Course Description
Course Learning Outcomes
Readings and Materials (additional materials may be posted on R-World)
Deliverables and Course Grade
Course Drop Deadlines
Grading and Assessment
Assignment Cover Sheet
Class Participation
Class Attendance
Accessibility Services
Academic Accommodations for Illness, Work Conflict, Religious Observance, or Personal Emergency
Code of Behaviour on Academic Matters:
Academic Integrity
Group Work and Behaviour
Use of Technology
Class Recording

Course Description
The course will consist of the following five modules. In the first module (strategic and industry
analysis) you will learn why the critical first step is to understand industry structure and a
companys strategic choices. The second module (accounting analysis) will provide you with a
framework to understand and evaluate a firms accounting and disclosure choices and learn how
to adjust financial statements to ensure better comparability. The third module (financial analysis)
will present a comprehensive framework for ratio analysis where a firms operations are separated
from its financing to better understand the true drivers of profitability and risk. The fourth module
(prospective analysis) will expose you to techniques of integrated forecasting, where you will
apply the insights from the earlier modules and apply them to truly understand what the future
holds for the firm being analyzed. You will then use these forecasts to value firms using a variety
of techniques including multiples and abnormal earnings based valuation methods. In the fifth
module, you will apply the business valuation techniques in a variety of settings including credit
analysis and M&A.
1

Course Learning Outcomes

Ability to understand a companys strategic choices

Ability to evaluate accounting and disclosure choices
Ability to make accounting adjustments
Ability to perform comprehensive financial statement analysis (e.g., ratio analysis, cash flow
analysis, etc.)
Ability to use accounting models to conduct pro forma modelling
Ability to value a firm using accounting-based inputs
Ability to use the aforementioned valuation techniques in a variety of settings including implied
cost of capital, credit analysis, and M&A.

Readings and Materials (materials posted on R-World)

Item
Textbook
Readings
and Cases

Title
No textbook

Required?
N/A

Location
N/A

See schedule

Required

Provided on R-world

REQUIRED RESOURCES
Available on course webpage: Presentations for class, Excel spreadsheets, links to articles from business
press, additional readings. There will be no additional course packet as all material will be made available
online. There is no required or recommended book for the course. If you wish, you may use any financial
statement analysis and valuation textbook as a supplementary reference.

Deliverables and Course Grade

The final course grade reflects your level of demonstrated achievement of the Course Learning Outcomes
listed above. Deliverables provide feedback on your progress towards the course grade.
Item
Class Participation

Weight %
10%

4 Case write-ups

25% for all

four in total

Group Project
Final Exam

30%
35%

Due Date
Ongoing
11:59 pm, the night before
class in which the case is
discussed. See schedule below.
Due at end of course
Exam Period

Delivery
Class

Note

eDropBox

Individual

No

eDropBox

Group
In-Class

No
No

Turnitin.com

N/A

More Information about Deliverables

Cases
All cases and related questions will be found on R-world

Group Project
Form groups of 4. Each class will have 40 students, which should correspond to 10 groups.
Choose a publicly traded firm that uses either IFRS or US/Canadian GAAP. Please do not choose a firm
that you worked for or currently work for. The reason for this is that only publicly available information
should be used for your analysis. Also, avoid any firm from regulated industries and financial services, as
there will be added complications for these analyses. Finally, do not pick a firm that is listed as a case that
we will discuss in class (see schedule below). One of the group members should email me with: 1.) the
names of each group member and 2.) The name of the chosen firm. As only 1 group may choose a given
firm, it will be first come first serve. If someone else has taken the firm you wish to analyze, you will have
to choose another firm.
Upon selecting your firm, obtain the most recent financial statements. You could use the Internet as most
firms have a lot of information usually under investor relations on their web sites, or the financials are
available on the EDGAR database (www.sec.gov) or the SEDAR database (www.sedar.com). IR websites
may have the statements in useful formats such as excel. Any other public information available on the firm
can also be used. Finally, you will also want to look at the financial statements of the firms major
competitors.
Main Objective:
Your group should take the role of investment advisor to a group of investors. Your ultimate objective is
to advise whether the investors should buy the stock of the company. Your report should include each of
the analysis modules we study in the course. In particular:
1. Industry and Strategic Analysis
Analyze the industry in which the firm operates. Do a 5 forces analysis for instance or use any
other framework you feel comfortable with. (Maximum 5 pages)
Analyze the strategy of the firm and compare it with other firms in that industry. (Maximum 5
pages)
2. Accounting Analysis
Analyze the firms accounting choices, compare with other firms in the industry and look for
red flags.
Make accounting adjustments as needed.
3. Financial Analysis
Conduct a complete ratio analysis using the ratios discussed in class.
Analyze the firms statement of cash flows
Analyze the change in the firms ratios and statement of cash flows over time
Compare the firms ratios and statement of cash flows against other industry competitors
4. Forecasting
Forecast the future balance sheets and income statements for a minimum of five years after the
date of the most recent set of financial statements. Use the condensed approach to creating pro
forma financial statements as discussed in class.
Include a section where you discuss how you generated the assumptions that underpin your
model
5. Valuation
Value the firm using the Abnormal Earnings Based Valuation.
Also, value the firm using one other technique (DCF, Multiples any other method you want to

use)
Make sure you run sensitivity analysis based on scenarios
6. Recommendation
Compare the valuation with actual stock price and try to provide plausible reasons for why the
firm's actual stock price may be different from what you valued it at.
Use this to make your recommendation
Please remember that while this is an integrative course, greater weight will be placed on the accounting
aspects. Use the industry and strategic analyses as a way to set the stage and dont focus too much attention
on them. Similarly, greater weight will be placed on the abnormal earnings based valuation method than
other methods.

Course Drop Deadlines

Elective Courses: drop dates are posted under Quick Links>Important Dates on R-World. Please
consult the Student Handbook about all restrictions and processes for dropping an elective course.
Core Courses (MBA) & Cohort Programs (EMBA, GEMBA, MFin, MFRM): the drop date is the date
by which no more than 50% of the course contact hours have been completed. If you need to drop a
course, please email the Associate Director in your Program Services Office with a formal request.

Grading and Assessment

Final grades in the course are given as letter grades. They reflect your overall performance in achieving the
stated Course Learning Outcomes. Assessment on interim deliverables can take many forms and they are
intended to give you an indication where you stand relative to others. This will allow you to make
adjustments to your approach, your expectations, and your performance. Please contact your instructor if
you would like more guidance on your individual course performance. More information can be found in
the Student Handbook.

Assignment Cover Sheet

You are required to use the Individual or Group Assignment Cover Page available on R-World for all
graded deliverables. For group deliverables, all group members must sign the Assignment Cover Page.

Class Participation
Your instructor will keep notes on your class participation throughout the course. As these notes naturally
reflect your cumulative and time-varying performance, your instructor will only be able to provide you
with meaningful feedback on your standing after a substantial number of class meeting dates. You can ask
your instructor for feedback at that time. Your performance on this course component will be assessed
based on the following contributions:
Quality of contributions to class discussion
To a lesser extent, the quantity of contribution to class discussion.

Class Attendance
You are expected to make every effort to attend every class. Accommodations for any absence that may
impact your class participation or any other graded deliverable must be approved by your Program
Services Office as outlined in the Academic Accommodations section below and in the Student
Handbook. Multiple absences may make it impossible for you achieve the stated learning outcomes for
the course. Therefore, please contact the Instructor as soon as practical if you anticipate that you will miss
a total of 25% of class time or more for any reason to have a conversation about whether the course

learning outcomes can still be achieved. The reduced learning due to multiple absences may result in the
need to withdraw from the course.

Accessibility Services
Academic accommodations are provided when you experience disability-related barriers that prohibit
demonstration of your knowledge and skills. Accommodations are provided to level the playing field
upon which you can establish your success. You are encouraged to inform yourself about options in this
regard at the web site for Accessibility Services.

Academic Accommodations for Illness, Work Conflict, Religious Observance, or

Personal Emergency
All requests for accommodation are handled by your Program Services Office, not the instructor. In the
event that you must miss any graded deliverable including missing a class where participation is graded
due to illness, personal emergency, religious observance, or unavoidable work conflict you must follow
the Policy on Missing Coursework or Course Assessments outlined in the Student Handbook, which can
be found on R-World. To get the Academic Accommodation form referenced in the Student Handbook:
email pso@rotman.utoronto.ca.
If an accommodation request is approved, a resolution will be determined by the instructor and may take
the form of an alternate deliverable, deadline extension, re-weighted course grade calculation, make-up
exam, or another solution deemed appropriate by the instructor. If an accommodation request is not
approved, the missed or late deliverable will be subject to an academic penalty. The extent of the penalty
is at the discretion of the instructor.

Code of Behaviour on Academic Matters:

Please read the Universitys Code of Behaviour on Academic Matters. It applies to all your academic
activities and courses. The Code prohibits all forms of academic dishonesty including, but not limited to,
cheating, plagiarism, and the use of unauthorized aids. Violating the Code may lead to penalties up to and
including suspension or expulsion from the University. You are expected to know the Code and inform
yourself of acceptable academic practices ignorance of the Code or the acceptable academic practices is
not a valid defence if you are accused of a violation. Here is a web link copy of the Code.

Academic Integrity
Case write-ups, papers, assignments, and all other deliverables must be original work, giving credit to the
work of others where appropriate. This applies to individual and group deliverables. All members of a
group are accountable for the academic integrity of their submissions. You are encouraged to consult the
Student Handbook as well as the following sites to ensure that you follow the appropriate rules. Ignorance
of these rules is not a defence in cases of violations, which can result in very serious academic sanctions.
University of Toronto Academic Integrity Web Site
Rotman BIC Resources
UofT Writing Centre Resources (including help on proper citations)
Office of English Language and Writing Support

Group Work and Behaviour

All groups should review the Project Teams & Peer Support section of the Student Handbook on R-World.
You are expected to treat teamwork the same way as you would in any professional organization. This
includes, but is not limited to:

Contributing substantially and proportionally to each project

Committing to a standard of work and level of participation agreed upon by the group
Ensuring familiarity with the entire content of a group deliverable so that you can sign off on it with
your name in its entirety as original work
Accepting and acknowledging that assignments that are found to be plagiarized in any way will
be subject to sanctions for all group members under the Universitys Code of Behaviour on
Academic Matters linked above
Ensuring that all team members voice their opinions, thoughts, and concerns openly and in an
inclusive and considerate environment
Taking personal responsibility for voicing your own thoughts to enhance and contribute to the
team learning
If you encounter difficulties with any group member that cannot be resolved within the group or through
other group/team resources already provided in the program, please contact your instructor for
guidance. Your instructor may refer you to your Program Services Office for further assistance.

Use of Technology
Like any professional organization, Rotman expects all of its members to behave responsibly and with
courtesy and respect for others when using technology. Many instructors will ask you not to use laptop
computers or other technology devices in the classroom in order to maximize learning and productive
interactions. With permission of the instructor, you can use laptops for note taking, in class activities like
spreadsheet modeling or software exercises, and for information access to materials related directly to the
class. Other uses are prohibited unless specifically permitted by the instructor. This guideline is in place to
ensure minimal disruption to your classmates. You are encouraged to contact your instructor if you find
that classmates inconsiderate use of technology is negatively impacting your experience.

Class Recording Policy

No class meetings for this course will be recorded by Rotman.

Course Session Outline

I plan to break up each session in to two parts. After the first class, any material that needs to be
discussed (in lecture format) will usually be covered in the second part. The case relevant to that
topic will be covered in the first session of the next class, as the outline will indicate. Questions for
the case will either be on R-World or at the end of the case itself.
All presentations will be uploaded onto R-World before each class. In addition, all supplementary
files will also be available on R-World (excel spreadsheets, etc). The 4 highlighted cases below will
also serve as the 4 graded HW submissions. Each of the highlighted cases needs to be submitted at
11:59 pm to an eDropbox on the night before we discuss the case in class. So, for example, the
Sunbeam case needs to be submitted to the eDropbox no later than 11:59pm on September 25th. All
other cases are not required to be handed in, but it is expected that you will be prepared and ready
to participate.

Schedule
Session
1-A
1-B
2-A
2-B
3-A
3-B
4-A
4-B
5-A
5-B
6-A
6-B
7-A
7-B
8-A
8-B
9-A
9-B
10-A
10-B
11-A
11-B
12-A
12-B

Date
Sep 12
Sep 19
Sep 26
Sep 30
Oct 3
Oct 17
Oct 24
Oct 31
Nov 7
Nov 14
Nov 21
Nov 28

Topic
Introduction
Industry and Strategic Analysis
Strategic Analysis Case
Accounting Analysis
Accounting Analysis Case
Accounting Adjustments
Accounting Adjustments
Accounting Adjustments
Financial Analysis
Financial Analysis
Financial Analysis
Ratios in Financial Institutions
Financial Institutions Case
Forecasting
Forecasting Case
Valuation
Valuation Case
Implied Cost of Capital
ICC Exercise
Credit Analysis
Credit Analysis Case
M&A Analysis
M&A Case
Wrap Up

Case to be discussed
Identify the firms exercise
CGI: Strategic Analysis
Sunbeam (HW 1)
General Motors
Exercises

Aeroplan Case (HW2)

Lehman Bros.
Best Buy
CGI: Forecasting and Valuation (HW3)
ICC of High tech firms
Canadian Oil Sands (HW 4)
TBD