Valuation Tutor: For Individuals

If you are interested in gaining a practical understanding of financial statement analysis, then read on.

Valuation Tutor is a visual and interactive presentation of financial statement analysis and valuation. We call it Valuation Tutor because it focuses on one thing: understanding how companies create value, and, if you work though to the valuation models, on learning how to come up with a value for a company’s stock.

It is perfectly suited for individual self study.  Learning with Valuation Tutor comes from accessing, analyzing, visualizing, and comparing companies using their financial statements and other relevant economic and financial data. The process is hands-on and takes an active learning approach: you learn by doing. You look at actual statements and interpret and extract information from them, compare actual companies, and earn to make your own judgments.  Our blog pieces show you interesting applications as well as highlight features of the software.

Conceptually, we divide the subject matter into three parts.  The first is “Understanding Financial Statements.”  Here, you learn what to look for: where what information is presented, what is in each financial statement, and so on.  It includes understanding a company’s strategy and looking at simple comparisons of a company’s performance.

In the second step, we look more deeply at a company and compare it to others.  Given its strategy, how effectively is it implementing it?  How does it compare to others (its competitors, those in the same industry, and so on)?  This part is made feasible by our dataset:  we take the raw statements and create from them a standardized dataset that makes comparisons possible.  We call this part “Financial Statement Analysis.”

The third part is “Valuation.”  There are different techniques used by analysts to come up with a value for a stock.  For example, if you go to the financial web site Yahoo finance, and look at the link “Analyst Opinion” for a stock, you will see price targets, e.g. the price target for IBM.  How do they come up with these numbers?  They use a valuation model.  We describe several different models and show you their practical implementation.

We have created a series of lessons to help you get the most out of Valuation Tutor.  They are grouped into the three parts:

We have created a series of lessons to help you get the most out of Valuation Tutor. They are grouped into the three parts, corresponding to the conceptual framework described , above: Understanding Financial Statements, Financial Statement Analysis, and Valuation.  The lessons themselves are accessible from the Lessons tab above.

We welcome comments and suggestions. The online textbook is free and if there are topics you would like to see covered or have suggested enhancements to the software, please let us know. You can submit these comments at the Valuation Tutor blog site.  The blog posts also introduce you to features of the software as well as applications of Valuation Tutor.

John O'Brien PhD (University of Minnesota) and Sanjay Srivastava PhD (MIT)




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