AC215: Business Analysis and Valuation

Knowledge of fundamental analysis and security valuation is essential to assess the information content of financial statements, isolate the long-term value drivers of a business, and successfully implement trading strategies.

Investment bankers, asset managers, financial analysts, and private equity investors use fundamental analysis techniques to critically evaluate financial data and design complex valuation models to guide their strategic decisions.

The aim of this course is to help students become sophisticated users of financial information from a fundamental analysis perspective. The course consists of four integrated parts:

1. Strategy analysis
2. Accounting analysis
3. Financial analysis
4. Forecasting and valuation

Students are expected to develop security analysis and valuation skills to support the interpretation, evaluation, and use of financial information from the viewpoint of major users of financial statements (i.e. equity investors, corporate lenders, etc.). Ultimately, students will be able to analyse a wide variety of financial reporting issues and discuss their valuation implications drawing on cutting-edge academic research and real-world case studies, including Apple, Ferrari, Netflix, and Tesco.

Moreover, as recent trends in big data and predictive analytics are disrupting the way in which security analysts, portfolio managers, credit-rating agencies, and regulators collect and analyse companies’ financial disclosures, students will also learn state-of-the-art financial modelling strategies to perform meaningful analyses on real-world data.

Prerequisites: Introductory accounting (to the level of AC110) and introductory finance are required.

Level: 200 level. Read more information on levels in our FAQs

Fees: Please see Fees and payments

Lectures: 36 hours

Classes: 18 hours

Assessment: Two written examinations

Typical credit: 3-4 credits (US) 7.5 ECTS points (EU)

Please note: Assessment is optional but may be required for credit by your home institution. Your home institution will be able to advise how you can meet their credit requirements. For more information on exams and credit, read Teaching and assessment

This course is aimed at students who, at some point in their careers, expect to use financial reporting information to evaluate past and current performance, assess future prospects, and estimate the intrinsic value of a business. The primary focus of the course is on the analysis of public corporations, but many tools and techniques that students will learn are also relevant to private company fundamental analysis.

This course will be particularly valuable to students who are contemplating careers in investment banking, security analysis, asset management, private equity, strategy consulting, and auditing. The course should also prove useful to those students currently undertaking interviews and assessments for careers in the finance, accounting, and consultancy sectors.

• Understand how business strategy and financial performance affect equity values
• Conduct fundamental analysis using real-world financial data
• Detect the overall quality of financial reporting information provided by firms
• Analyse credit risk and equity risk using financial statements
• Use accounting information to assess past and current firm financial performance
• Implement prospective analysis to forecast future earnings growth
• Apply discounted cash flow and residual income valuation models to estimate equity and enterprise values
• Apply relative valuation techniques
• Exploit accounting information signals to identify mispriced securities
• Value publicly traded equity securities and private equity investment opportunities
• Make sense of sales pitches in equity research reports
• Understand the critical valuation challenges of IPOs and M&As deals

The design of this course is guided by LSE faculty, as well as industry experts, who will share their experience and in-depth knowledge with you throughout the course.