FINANCIAL ANALYSIS BY BANKS AND ANALYSTS

The course is one of the compulsory educational activities of the curriculum in Accounting and Finance of Master Degree in Management.
It allows to learn how to set solid and lasting relationships between the firm and the institutions providing funds (equity and debt).
In particular, the course will analyze the tools and methodologies used by
1) investment funds, in investment decision-making processes (both for equity and debt);
2) financial analysts, on the valuation of listed companies.

Upon completion of the course, students will have a broader understanding of the tools used by investment funds and financial analysts in performing their activities.
In terms of knowledge and understanding, the students will:
- understand which methodologies and analysis are conducted for the purpose of: 1) evaluating a company, in the event of an intervention of a private equity fund; 2) determine a target price of a listed company by financial analysts; 3) assess the ability to repay debts, in the event of an intervention of a debt investment fund.
Regarding the application of knowledge and understanding, the students will:
- be able to prepare a preliminary draft of an information memorandum to be used for capital or debt transactions;
- be able to prepare a preliminary draft of a financial analysis report aimed at determining the target price of a listed company .
In terms of judgement abilities, the students will:
- be able to present a set of clear and structured arguments to support the decision to make a financial intervention in terms of debt or equity.

Foundations of bank lending services and corporate finance; accounting; financial statements analysis and evaluation.

MAIN FINANCIAL DISCLOSURE ISSUES
The role of financial disclosure in the capital markets;
the actors of financial communication.

BRIEF OVERVIEW OF DEBT AND EQUITY
Debt vs Equity;
cost of Debt vs cost of Equity;
advantages and disadvantages of debt;
meaning of leverage.

DEBT: ANALYSIS OF OPERATIONS BY LENDERS
Analysis performed by investors (banks or investment funds) focused on the issuer
financial statements ratios;
judgment on the company and on the management;
rating assigned by agencies.

Analysis performed by investors focused on the specific issue (bond or bank loan).
Liquidity of the investment;
risk coverage degree;
financial adequacy of the issuer with respect to the operation;
profitability,
financial balance.

FURTHER ANALYSIS CARRIED OUT IN EXTRAORDINARY FINANCE
Extraordinary vs ordinary finance: a different approach
Static evaluation (traditional approach) vs dynamic evaluation (perspective approach)
Financial structuring of the operations
The Bcg Matrix
The financial ratios used - Focus on the Debt Service Coverage Ratio (Dscr)

Financial structuring of operations.
Determination of:
cash generation at an industrial level (EBITDA)
annual cash flows to cover the debt
the repayment plan for the new debt
bullet vs amortizing debt
the leverage ratio
Any Equity requirement

Illustration of the Discounted cash flow model

PRIVATE EQUITY
The rationale of private equity and types of transactions;
brief overview of venture capital (seed financing and star up financing) and finance for change (replacement, buy out, turnaround);
analysis performed by funds in their investment processes.

FINANCIAL ANALYSTS
Description of their activity and their role in the financial markets;
examples of analysts’ reports.

Financial Analysis by Banks and Analysts - McGraw-Hill
2019 edition
ISBN 978-13-074-6146-6

CUSTOM PUBLISHING
Universita' Ca' Foscari Venezia
Department of Management

Further reading will be selected for specific topics

The exam assesses the general knowledge of course topics.

The assessment is based on 1) a written exam on the referral texts and on the materials provided by the instructor; 2) an oral exam.

Description of the written exam
The written exam is composed by 10 questions, 5 multiple choice questions and 5 short exercises.
For each question the right answer scores 1 points, a wrong one scores - 0,25, no answer scores 0.

So the range of votes is from -2,5 to 10.
In order to pass the written exam the score must be greater than or equal to 6/10.
No textbooks, class or personal notes, slides, cell phones or other devices are allowed during the exam.

Description of the oral exam
Small teams (2-5 students) will perform an empirical work consisting in the preparation and illustration of a hypothetical presentation concerning a deal of a real company. The presentation is ideally directed to providers of equity and/or debt capital (investment funds).
The analysis of the deal is chosen by students - from a list previously prepared by the teacher - and upon his approval.. The analysis is made up by a report and a presentation lasting no more than 60 minutes.
The range of votes is from 0 to 20.

In order to pass the oral exam, the score must be greater than or equal to 12/20.

The final grade is the sum of the grades of the written and the oral exam. In order to pass the exam, the score must be greater than or equal to 18.
The exam can be taken in the usual exam dates.
If a student refuses the written grade, the new grade overrides the previous one .

The attribution of the “cum laude” is at the discretion of the instructor, provided that the final grade is 30.

The course will be characterized by frontal lectures by the instructor and guided class discussions.
Teaching material (slides and simulations of exam exercises) will be available on the e-learning platform moodle.unive.it.

English

Office hours will be held by appointment via email

written and oral