| Call Number | 14628 |
|---|---|
| Day & Time Location |
M 2:20pm-5:35pm 820 Kravis Hall |
| Points | 3 |
| Grading Mode | Standard |
| Approvals Required | None |
| Instructor | Stephen H Penman |
| Type | LECTURE |
| Method of Instruction | In-Person |
| Course Description | This course is about handling accounting information in value investing. The issue is straightforward: How do I infer value from such numbers as earnings, book value, cash flows, return on equity, and return on assets? What are the pitfalls? When can I be led astray? How do I make valid inferences? "Profitability" is an important valuation attribute, but does reported accounting profitability convey real profitability? If not, how do I handle the deficiency? The answers to these questions require, first, an understanding of the integrity of the numbers that financial statements report and, second, an understanding of what a "clean" number tells us and what it does not tell us. The first question is the issue of so-called "earnings quality." While we will be sensitive to the quality of the accounting in this courseand indeed develop some striking criticisms and make adjustmentsour focus will largely be on the second, the issue of appreciating the value implications of accounting numbers. (There is a detailed course on earnings quality at Columbia Business School, Earnings Quality and Fundamental Analysis, B8008.) Accounting numbers, used appropriately, are powerful aids to the value investor in understanding a business and the value in that business. However, they can be easily misused. A P/E ratio, for example, serves as an important input to a value investor, but the investor is in danger of being falsely cued if he or she does not appreciate what that ratio actually captures. A too-simple form of "value investing" trades on P/E and price-to-book (P/B) under the label, "Value versus Growth" investing, but the uninitiated is in danger of falling into the Value Trap. In this course you will understand the Value Trap and how to avoid it. More importantly, you will appreciate how a dedicated approach to value investing deals with accounting numbers to understand when price is different from value. Indeed, the course will show how to bring the appropriate (possibly adjusted) accounting numbers together to challenge the market price and thus avoid the greatest risk in investing, the risk of paying too much. The course title is that of my book, Accounting for Value. This easy-read develops the themes and the course flushes them out. By the end of the course, you should have the answers to the following questions: How do I understand the profitability of a business from the financial statements and what does that imply for the value of the business? Apple Inc. trades at a forward P/E of 11.5. What does that tell me? Is t |
| Web Site | Vergil |
| Department | Accounting (ACCT) |
| Enrollment | 55 students (74 max) as of 10:06AM Thursday, November 21, 2024 |
| Subject | Accounting |
| Number | B8022 |
| Section | 001 |
| Division | School of Business |
| Open To | Architecture, Schools of the Arts, Business, Columbia College, Dental Medicine:Post-Grad, Dental Medicine , Engineering:Undergraduate, Engineering:Graduate, GSAS, General Studies, SIPA, Journalism, Medicine, Nursing, Public Health, Professional Studies, Social Work |
| Section key | 20241ACCT8022B001 |