COURSE NUMBER: MBA237.2A
COURSE TITLE: Financial Statement
Modeling for Finance Careers
UNITS OF CREDIT: 1
INSTRUCTOR: Sarah Tasker
E-MAIL ADDRESS: tasker@haas.berkeley.edu
CLASS FORMAT: In-class exercises with
some lecture and discussion. Students are required to bring a laptop computer
to every class.
MEETING DAY(S)/TIME: Monday, 4:00-6:00
PM, during Spring A (January 27 – March 17)
PREREQUISITE(S): Mastery of the concepts
from Core Accounting and Core Finance; Intermediate Excel skills along the
lines of what is covered in Essential Workbook Techniques, Power of
Calculations, and Data Analysis with Functions at Haas Computing Services.
REQUIRED READINGS: None
BASIS FOR FINAL GRADE: In-class
exercises, homework, quiz, class participation
ABSTRACT OF COURSE'S CONTENT AND
OBJECTIVES:
According to Wikipedia, "Financial
Modeling" is one of those terms that means very
different things to different people. For financial analysts and investment
bankers, "Financial Modeling" typically refers to taking historical
financial statements for a particular company, projecting those statements two
to five years into the future, and using the resulting projections for valuation
and insight into the potential for transactions such as a strategic merger, an
initial public offering, a leveraged recapitalization, or a leveraged buyout.
At Haas we call this skill set "Financial Statement Modeling for Finance
Careers" (FSMFC) to distinguish it from other forms of financial modeling.
The skills and knowledge taught in
FSMFC are essential preparation for careers in financial analysis or investment
banking. In addition, past students not pursuing these career paths have found
the course very helpful for cementing their understanding of the material in
other accounting and finance courses by seeing how this material is used every
day on Wall Street.
In Spring A 2014 we will build an
entire "three statement" (Income Statement, Balance Sheet, Statement
of Cash Flows) projection model for Papa John's (the pizza company), experiment
with alternative approaches to "plugging" the balance sheet to
implement alternate financing policies, build a fixed asset schedule to model
property, plant & equipment, and then around this set of projections
perform a discounted cash flow valuation, a leveraged buyout analysis, and a
back-of-an-envelope merger consequences analysis. We will also briefly study
the modeling Wall Street analysts published in connection with the recent
initial public offering of The Fresh Market (an East Coast grocery store), as
well as for relative valuation of the publicly-traded bonds of Nordstrom's, the
department store.
Given the one unit nature of this
course, our coverage of the FSMFC skill set will be incomplete, and therefore
students pursuing careers in financial analysis and banking will definitely
also want to sign up for the supplemental workshops offered through Haas Career
Services by Training the Street.
Note for students who have taken
"Designing Financial Models that Work": FSMFC and DFMW are very
different courses, and completely complementary. FSMFC has zero coverage of
spreadsheet design issues, and requires complete mastery of the financial
accounting concepts covered in the core accounting course (e.g., the difference
between accumulated depreciation and depreciation expense, or how to put
together a SCF from an I/S and B/S, etc.)
BIOGRAPHICAL SKETCH:
Sarah Tasker cares deeply about
alleviating perplexity, especially when it comes to financial modeling. She has
spent the last decade teaching modeling to Haas students, Cornell students, and
many new investment banking hires. She won the Apple Teaching Award at Cornell
and the Cheit Award for Excellence in Teaching at
Haas. Her undergraduate and doctoral degrees are both from MIT.