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Financial Theory

Econ 219 - Financial Theory and Analysis - This course takes the principles of accounting and applies them to the world of finance. The emphasis is on the theory that underlies corporate accountability for financial reporting. Selected reporting and disclosure issues, such as financial statement presentations, earnings per share (EPS), debt, equity, and investments of excess funds for strategic financial management, as well as cash flow analysis, are incorporated. Excel spreadsheets are used extensively.

This course focused on financial reporting and the analysis of financial statements. Topics covered included:

  • Accrual accounting
  • Structure and analysis of the balance sheet, income statement, and cash flows
  • The role of financial information in valuation, cash flow analysis and credit risk analysis
  • Receivables and inventories
  • Long-lived assets and depreciation
  • Financial instruments and liabilities
  • Income tax reporting

I found this course to be a very helpful and I enjoyed the in-depth analysis of the various financial statements a company reports.

When analyzing a company's income statement and comparing past years, it is helpful to common-size income/expenses. This will allow a better comparison from year to year for various incomes/expenses because they are represented as a percentage of revenue, not just absolute values. For Gillette, I created a common sized income statement.