01 Econ 118 Intro - Overview
01 Econ 118 Intro - Overview
01 Econ 118 Intro - Overview
INTRODUCTION
Who am I?
Scott Fulkerson
Audit Senior Manager at Ernst & Young LLP
- 14 years at EY
Graduated UC-Santa Barbara 2004
- Major in Business Economics with emphasis in Accounting
- Minor in Sports Management
Teaching Econ 3B, 118, 136A, and 132
Interests:
- Golf, Running, Triathlons, American Ninja Warrior, Dexter,
Breaking Bad, Seinfeld, and sadly Bachelor(ette)/BIP
• Fun facts:
- Played 1 year on UCSB golf team
- Worked at In N Out on Turnpike / Intern for local CPA/Lawyer
- Thought Econ 3B and 136C were the hardest classes
- Favorite Acctg classes were 118, 132 and 136 series
- Favorite Non-acctng classes: Nutrition 3, Sports Man 130
and Admin 140 (ESS), Dance 45, Hum Sexuality 152A, Sailing
- Completed two Ironmans in Arizona in November 2018 and 2017
Financial Statement review
What positive and negative items do you see in
these financial statements?
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Financial Statement review
What positive and negative items do you see in these financial statements?
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Financial Statement review
First Company was Circuit City, the following year they lost $8.3 million and then lost
$320 million. In 2009 they filed for bankruptcy and were out of business. Article in
January 2018 -
http://abc7.com/shopping/circuit-city-announces-february-relaunch/2928192/
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Financial Statement review
This Company’s EBITDA is close to a positive $90 million. It was
purchased by a Private Equity (PE) firm for almost $1 billion in 2014.
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Financial Statement review
Think about that. One Company that looked bad on paper, ended up
being the success of the two.
3. Learn to access and filter the vast amount of information available for
performing analysis of a company.
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What is this course? EXPLORATION
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VALUATION
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HOW WE WILL DO IT: LEARN BY DOING
2. I will provide an overview of sections and even go over homework problems during class
after being turned in;
3. During the first 2/3 of the course, we will work together by learning about accounting
analysis and using various publically traded companies as a mechanism for “learning”
how to apply certain concepts.
− Homework, Midterm, and Final are based on assignments given and lecture
− Slides will be provided
− Cameras - Phones – Sure.
This also is not very real world.
If material is covered too fast to take notes, just let me know
− The Textbook……
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HOW WE WILL DO IT: LEARN BY DOING
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GROUP WORK:
You will work in groups. I hope that the following will serve as motivation to participate fully in
your group:
This is how you will learn the content you will be tested on;
You will work in groups when you go to the real world, this is an opportunity to start
developing a productive style of your own;
THE MORE YOU PUT IN, THE MORE YOU WILL GET OUT of the group work.
The above should be enough, but you will also be evaluated by your team-mates at the end of
the course which will be factored into your final letter grade in the course.
Slack off, and your grade will suffer;
Be a jerk, and your grade will suffer;
Contribute, be a valued asset to your team, and your grade will benefit!!
START WORKING TOGETHER EARLY, DON’T WAIT UNTIL THE LAST 1/3 OF THE CLASS TO “START” YOUR ANALYSIS. IF
YOU DO THIS RIGHT, YOU WILL HAVE YOUR COMPANY ANALYSIS SUBSTANTIALLY COMPLETE AND BE ABLE TO SPEND
ONE ON ONE TIME WITH ME TO MAKE IT BETTER DURING THE LAST 1/3 OF THE COURSE.
Groups will be randomly assigned. If you picked your teammates this wouldn’t be very real
world would it?
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GROUP PRESENTATIONS
Your group will present your evaluation during the 3 hour final slot
we have. There will be a “hard-stop” for your presentation at
anywhere from 10-12 minutes (depending on number of groups) to
allow 3 minute transition to the next group.
The presentation is to a potential investor who has hired you and
another team to influence them which stock to purchase
I will grade your oral presentation on the same scale, but mine
counts for half.
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Course points
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Course project
I will select teams late the first week of classes, as I try to allow time
for drops/ adds so that teams do not lose team members.
Criteria for the project and time of presentations during final will be
posted on Gauchospace shortly.
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Class participation
Why?
1. Deer in headlights 2. Discussion 3. Have fun 4. Class is as
exciting as watching paint dry if no one is responding
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OUR APPROACH, LINKED TO TEXT
SEQUENCE:
Text Chapter
SCF Valuation
0 1 2 3 4 5 6 7-9 10-12
Intro Overview
Avanced Accounting Intro
Company - Industry Risks
Cash Flow Analysis
Financial Position - Liquidity & Solvency
Profitability and Financial Flexibility
Valuation
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Primary Focus: Financial Reporting
Concepts apply equally to public companies as well as non-public.
However, we will be focusing on public companies, only because their
financial information is “publicly” available.
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Primary Focus: Financial Reporting
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FINANCIAL ANALYSIS, A PICTURE
PUBLIC INFO:
SEC.GOV
10-K Considers
10-Q Quantitative as well
8-K as qualitative
PROXY information
Investor relations
Other analysts
News
& Other…
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CAUTION: Management is generally optimistic!
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USERS OF FINANCIAL STATEMENTS
MOST COMMON:
Current owners: should I buy more? Sell? Hold?
Prospective investors: Should I buy? What should I buy?
Lenders: Should I lend? How much risk is there of full
repayment including interest- i.e. what rate should I charge?
Market/ Investment Banker analysts
Management
OTHERS:
Mergers & Acquisitions (M&A) and partial sales
Insurance providers
Employees
Customers/ Vendors/ Many others
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GAAP: is it good enough?
If GAAP alone were enough then there would be no work for financial analysts. The
common use of the following provide compelling evidence that GAAP statements are
not sufficient on their own:
Adjusted EBITDA: Earnings the way management views or least wants users to see
it.
Generally includes adjustment for items that management doesn’t consider to be
indicative of future cash flows.
− Okay for management to do this, AS LONG as they reconcile to the audited
statement amounts.
It’s scary how loosely read the notes to the financial statements are! READ THE
FOOTNOTES! They are audited and tell a story and help present the big picture.
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EBITDA
EBITDA shows the kind of earnings the company generates from their
principle operation, exclusive of how they are financed, or what tax rate
they pay.
Useful in comparing profitability to other companies;
But if death and taxes are certain, does it make sense to ignore taxes?
Also does a company magically not have to worry about the interest on
their debt?
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From me to you
NOBODY, not even me, can tell you how YOU should perform YOUR analysis.
The more you think about what you are doing, considering traditional ratios and approaches
as a RESOURCE rather than a guide, the more you will understand your own analysis.
In my experience, finding my own path has lead me to many conclusions that are commonly
accepted, however, not even I can predict the weather, or the outcome of results on a stock
price.
- Insider trading
- Opposite results / market reaction
I hope this course is structured enough for you to follow but flexible enough for you to
explore.
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