Valuation Tutor: Instructors Page

Valuation Tutor can be used in both undergraduate and graduate classes.

• It is designed to teach
1. Corporate Financial Reporting
2. Financial Statement Analysis
3. Valuation
4. Security Analysi
• It can also be used as a supplement in any course that covers financial statements, such as investments, corporate finance, financial management, and managerial accounting
• It can be used in conjunction with an existing textbook or with the free online textbook

Teaching and 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. In each case, we emphasize the integration between accounting and finance, the analysis of individual companies, and comparisons across companies.

Valuation Tutor Lessons

We have created a series of lessons to help your students get the most out of Valuation Tutor.  Conceptually, we have divided the subject matter into three parts. The first is “Understanding Financial Statements.” Here, your students 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, they 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.” Students learn about different techniques used by analysts to come up with a value for a stock. We describe several different valuation models and show you their practical implementation.

The lessons can be accessed from the “Lesson” tab above.

Specific Teaching Topics

Common Size Analysis of Financial Statements:  You can conduct a common size analysis relative to Sales, Total Assets, Invested Capital, Capital Employed, Shareholders’ Equity and Market Price.  The exercises here apply common size analysis to financial statements in order to understand important linkages among the primary financial statements, at a sector or industry level, or relative to all companies in the dataset. The end result is to identify both positive and negative flags in the financial statements.

Cost-Volume-Profit Analysis:  This topic includes, Contribution Margins, Break-Even Sales Revenue, Margin of Safety, Activity Analysis (Degree of Operating Leverage, Degree of Financial Leverage and Degree of Total Leverage) for publicly listed firms.  Students gain important insights into the operating and financial risks of a firm.

Financial Ratio Analysis:  This starts with the concept of fundamental growth and its relationship to the three major firm decisions (investment, financing and dividend decisions).  It then proceeds to the DuPont and Extended DuPont decompositions.  The decompositions are then further decomposed into Working Capital Analysis, Profitability Analysis and Risk Analysis using financial ratios.

Price Ratio Analysis:  This starts with the concept of relative valuation and identifying over- or under-valued firms relative to competitors/industry and the market as a whole.  The topic starts with bottom line measures such price to earnings (P/E), P/E to Growth, and then moves to top line measures such as price to Sales.  In addition, price to cash flows and risk ratios such as price to book value are also covered.  Cross sectional comparisons are made in the same way as in previous topics, using market decile analysis and industry/competitor analysis.

Separate Sub-Components of the Price Ratio Analysis Topic:

·    Earnings Quality Analysis including cash flow measures, income statement and balance sheet measures and Analyzing Default Risk, credit ratings and Altman’s Z-Score.

·    Cost of Capital:  This topic analyzes the cost of capital for publicly listed companies using CAPM, A default risk relative option’s based measure (MCPM), and the Weighted Average Cost of Capital for both CAPM and the default risk approaches.

Valuation:  The Valuation Topics allow each of the major valuation models to be applied to the publicly listed companies in the databases.  These models include the Dividend/Earnings, Free Cash Flow, Residual Income, Abnormal Earnings Growth and Merton’s Distressed Firm models.


 Universities: Annual Site License (available to all students and faculty):  $ 7,500.00