Modeling Financial Statements

Overview

Various management disciplines teach you how to analyze and forecast parts of a business. Building on this foundation, this course will help you weave your forecasts into coherent spreadsheet-based pro-forma financials. Modeling and projecting comprehensive financial statements provides a reality check on the forecasts, enables "what if" analysis, provides an integrated view of the business, and is a key step in valuation.

The course will start from conceptual examples that illustrate the key intuition and explain linkages between financial statements. It will then build on these examples to forecast the financial statements of real companies.

Disclaimers

This course is for you if you need to build models for your job. I do not intend to insult you with the statements below, but please do not take this course if the following applies to you:

• Accounting scares you and you do not like to read challenging material in advance. This course does not review accounting concepts. It assumes that you had a good accounting core course.
• You want a textbook for the course. I am writing my own materials, but it will take me two more years before I have anything resembling a book.
• You do not have the time to do the assignments. The course could easily take up to 10 hours of work per week. Take a look at last year's ratings to see that at least 33% of the class did not find the workload manageable. Don't take this course if you don't have the time to do the assignments.
• You just want an overview. You will benefit from this course ONLY IF you are pursuing a career in investment banking, private equity, buy-side or sell-side research, credit research, corporate finance, and valuation on a job that requires you to build models.
• Your Excel skills are weak. This is not an Excel class. You can learn Excel much cheaper outside a graduate school.
• As announced below, make sure that you can attend the last class because there will be a final exam in the last class. The exam cannot be rescheduled.
• If you are on the waitlist. please read this email from Dean Corfman before contacting me.

Prerequisites

• You need to bring a laptop to class with sufficient battery power to last three hours. If you have any technical questions, please contact the IT department (212-998-0180), NOT me.
• I have tried using Excel 2007 but did not find the change worthwhile. All class examples will use Excel 2003. However, you can use Excel 2007 if you wish.
• Make sure that you can connect your laptop to the Stern wireless network.

Help and Office

• Administrative assistant: Halima Khan hkhan@stern.nyu.edu 212-998-0003, Office: KMEC 10th Floor
• Teaching assistants: maneet.singh@stern.nyu.edu marsha.kublall@stern.nyu.edu saumya.senapati@stern.nyu.edu
• Me: dgode@stern.nyu.edu, 212-998-0021, Office: KMEC 10-86.

Materials

• I will not require a textbook because I have never found one that covers modeling financial statements in sufficient detail. I am writing my own materials.

Assignments

• Please do not email me to reconfirm any of the statements below.
• The assignments appear as tests on Almaris.
• See the grading section below. Some assignments are short, others are long. Please manage your time. Click on each assignment to see how to prepare for that assignment.
• NO EXTENSIONS will be granted for any reason except medical or family emergencies. If you have religious or personal conflicts, submit the assignments early. The related materials are covered well in advance of the assignments. Please do not email me to request extensions unless you have a medical or family emergency.
• You can learn concepts from others, but you must work on the actual assignment alone. You may be called upon in class to explain your answer to the assignments.
• All assignments are mandatory. If you cannot get the CD on time or do not have a Windows-based computer, you are exempted from To view the on-line assignments, login at http://www.almaris.com/assess/ using the email and most recent password emailed to you by Almaris. To retrieve the password, use your Stern email id as it appears in the registrar's records. If you were added to the class list after the intial registration date, please email me.
• Assignments are marked "late" if you do not meet or exceed the passing score described below before the deadline. There is no additional penalty for lateness other than the low score.
• Assignments have a "passing score" of either 100% or less than 100%.
  • I set the passing score at 100% if I believe that you should be able to ace the assignment. In reality, there is no passing grade. Whatever you get on your last attempt is your final score. That is, you are graded on accuracy but not the number of attempts. If you are allowed five attempts, and you use them, then your score on the fifth attempt is your final score for the assignment. There is a difference between "passing" and getting full credit. If you get 70/100 on your fifth attempt, you "pass" but you don't score a 100.
  • On a few assignments, I set the passing score to be less than 100% if I believe that you may not be able to get every question right. Any score above that score is rounded up to 100%. For example, if the passing score is set at 90%, and you get 93%, then your score is rounded up to 100%. I do the rounding up in a separate spreadsheet. You will see only the raw score on line.
• Almaris is not affiliated with Stern in any way. It is offering these tests to Stern at no charge to Stern.
• Almaris staff is not authorized to extend deadlines under any circumstances. Only my TAs can do that. Almaris staff will reply to your emails only if they pertain to technical issues with the Almaris system. You should contact Stern IT for technical issues with your network.
• Final project

Exams and Grading

• You will not be penalized for missing classes. All classes are videotaped with the video posted to Blackboard. You need NOT email me if you plan to miss a class, be late, or leave early.
• If you have a qualified disability and will require academic accommodation during this course, please contact the Moses Center for Students with Disabilities (CSD, 998-4980) and provide me with a letter from them verifying your registration and outlining the accommodations they recommend. If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.

The grades will be based on the final exam (50%) and one project (50%). The assignments are not formally graded but can affect your grade adversely if you do not complete them on time. It is not necessary for you to get a full score, but you must show due diligence in completing the assignments. The final exam will not be rescheduled for any reasons except medical or family emergencies. Work commitments will not be a valid reason for rescheduling.

Schedule

I am teaching three sections of this course in spring. All classes are held in KMEC 3-120.