Programmes

Financial Statement Analysis for Investment Banking and Asset Management

  • Summer schools
  • Department of Accounting
  • Application code SS-AC210
  • Starting 2020
  • Short course: Open
  • Location: Houghton Street, London

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. 


Session: One
Dates: 22 June – 10 July 2020
Lecturers: Dr Ken Lee and Dr Aneesh Raghunandan

Programme details

Key facts

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:

Midterm Exam, written during the second week, 50%

Final Exam, written on the last day of the session, 50%

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


*Assessment is optional

**You will need to check with your home institution

For more information on exams and credit, read Teaching and assessment

Prerequisites

Any undergraduate-level course with some accounting or finance content. 

Programme structure

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.

Course outcomes

 

By the end of the course, students should be able to:

  • 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.

Teaching

The Department of Accounting continues to enjoy a reputation as one of the leading groups in the world for teaching and research on the economic, institutional and organisational aspects of accounting and financial management. The department strives to combine 'global appeal' with a distinctive 'European orientation' in terms of institutional knowledge and affiliations, as well as intellectual traditions.

The Department, along with the Departments of Finance and Management, was ranked as the UK leader for Business and Management Studies in the most recent National Research Assessment Exercise.

On this three week intensive programme, you will engage with and learn from full-time lecturers from the LSE’s accounting faculty.

Reading materials

There is no required textbook for this course and materials will be distributed through a mixture of online access and hardcopy handouts.  These will contain presentation materials (slides), required readings and a small number of relevant academic journal articles. Those less familiar with accounting may want to read the early chapters of the two books mentioned below. They should also be useful for general reference if needed.

  • Financial Statement Analysis under IFRS: Lee, K. and Taylor, D., (Financial Edge publishing, 6th Edition, 2018)
     
  • Financial Accounting: An Introduction to Concepts, Methods and Uses, by Stickney, Weil, Schipper and Francis (SWSF) (Thomson Learning, South-Western, 14th ed.).

*A more detailed reading list will be supplied prior to the start of the programme

**Course content, faculty and dates may be subject to change without prior notice

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Related Programmes

Performance Measurement for Decision-Making

Code(s) SS-AC201

Business Analysis and Valuation

Code(s) SS-AC215

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