6-2: Financial Statement Extraction, Interpretation, & Analysis

Financial statement literacy, interpretation, analysis, and reconstruction.

6-5: Core Operations & Metrics

Identification of operating assets, net financial obligation, and common equity. Progression of financial statement extraction of financial activities and equity accounts.

6-6: Advanced DuPont Analysis

Use of core metrics to disassemble the return on common equity, return on net operating assets, and return on financial leverage to reveal useful passageways.

Equity Valuation & Analysis

"Value strategies yield higher returns because these strategies exploit the suboptimal behavior of the typical 

investor and not because these strategies are fundamentally riskier." - Lakonishok, Shleifer, & Vishny, Journal of Finance, 1994

7-1: Free Cash Flow Concepts and Dividend Models

Discussion of measuring free cash flow as the distributed cash to equity investors. Demonstration of the Gordon Growth Model and the Dividend Discount Model, and limitations. Introduction to statis models (valuing company using most recent financial statements) versus dynamic models (establishing a trend analysis and incorporating forecasts of financial statements).

7-2: Measures of Free Cash Flow

Conceptual and computational presentation on measures of free cash flow, including unlevered free cash flow. Discussion of value to equity investors and value to all investors (debt + equity holders).

7-3: Derivation of Residual Income

Discussion of the Statement of Common Equity, breakdown into retained earnings & dividends, and changes in contributed capital. Re-arrangement of the statement of common equity to isolate residual income. Further conceptual discussion on theoretically investing equity at the cost of equity.

7-4: Applied Residual Income Models and Pricing

Applying both residual income equations to produce a range of equity prices, then throttling the weighted average cost of future capital to drive valuations to a singular price.