10 July 2020
Financial Statement Analysis for Investment Banking and Asset Management
Accounting information is of critical importance to capital markets. This introductory course combines practical guidance and academic theory to provide students with a thorough grounding in the use of financial statements for investment analysis and banking. It addresses the key aspects of accounting relevant to equity analysts, mergers & acquisition (M&A) bankers, asset managers and other capital market participants. The delivery of the programme will be based around short technical sessions reinforced with numerical exercises, practical case studies, press articles and video extracts. Additionally, the course will involve guest speakers, such as a sell-side analyst and an investment banker, to help students understand the various financial services roles as well as the relevance of accounting information.
After introducing the key concepts of accounting relevant to capital markets the specific topics covered will include the calculation of underlying earnings (with a focus on revenue), the assessment of earnings quality, concepts of sustainable cashflow, forensic detection of accounting problems (“earnings management”) and how M&A accounting works and can be analysed. Given its increasing importance, the course will also address how market professionals can reflect environmental (climate change), social and governance issues (ESG) in their financial analysis. The course concludes with an introduction to valuation terminology and practice.
The material should be accessible to students with little previous background in the field, as well as rewarding for those who already have some familiarity with aspects of the content. The key is an interest in learning about how accounting interacts with the activities of capital market participants. The course should have international appeal as it will consider accounting from both an international accounting (IFRS) and US GAAP perspective. The course is especially suitable for those who may be interested in equity research, asset management and investment banking and would provide an excellent foundation for those preparing for interviews and assessment centres in these fields.
This course explores financial statements from the perspective of capital markets. It provides students with an introductory, but comprehensive, grounding in the role of various key players (analysts, asset managers and investment bankers) and how financial statements help them in their work. Often students find the concepts and terminology of capital markets confusing and so we carefully build up critical concepts assuming no previous familiarity. This approach ensures students leave with a useful, applied knowledge about issues such as different earnings measures, earnings quality, return calculations and leverage.
The framework covers key analysis components such as:
Introducing, describing and analysing the key roles of sell-side analysts, asset managers and investment bankers.
Deconstructing earnings – reading and understanding income statements, understanding some of the key nuances in the timing of revenue (and, hence, earnings) recognition, different measures of earnings (EBIT, NOPAT, PAT etc) and their importance to capital markets, an introduction to earnings quality and earnings management.
Deconstructing balance sheets – understanding leverage, asset intensity and capital employed.
Mergers and acquisitions – Accounting implications and analysis points.
Bringing it all together – measures of return (ROIC, ROE etc).
An introduction to the anatomy of a valuation model – an introduction to valuation terminology and practice.
Climate change – how to integrate ESG related factors into financial analysis.
Dr Ken Lee and Dr Aneesh Raghunandan
Undergraduate and graduate students
- Understand the role of the key actors in capital markets: what they do and why they do it;
- Understand how financial statements are used by different market actors;
- Gain a highly practical and applied knowledge of critical concepts for investment analysis and banking;
-Use the terminology of capital markets when speaking about accounting and analysis;
- Assess basic aspects of earnings quality, returns on capital and leverage;
- Appreciate the earnings game and how companies communicate information to financial markets;
- Assess how environmental factors might impact financial analysis;
- Understand the fundamental terminology of valuation.
Typical credit: 3-4 credits (US) 7.5 ECTS points (EU). You will need to check with your home institution. Assessment is optional.
GBP 2500: Discounts apply when booking multiple courses. LSE Summer School runs three sessions, and students can book one course each session. Save 32% on your second course and 68% on your third course.