ACCOUNTANCY Arthur SUSSMANN - Sciences Po

Arthur Sussmann
arthur.sussmann@sciences-po.org
Mobile phone: 06 42 97 18 93
ACCOUNTANCY
Arthur SUSSMANN
Introduction to the basics of Finance & Accounting 1
Fall semester 2012
INTRODUCTION: Functions and main principles of Accounting & Finance
SESSION 1: Financial statements (1/3): The balance sheet
SESSION 2: Financial statements (2/3): The income statement
SESSION 3: Financial statements (3/3): The cash flow statement & Time value of money
SESSION 4: Financial analysis (1/2): introduction to the tools of strategy
SESSION 5: Financial analysis (2/2): from margin analysis to profitability analysis
SESSION 6: Mid-term
SESSION 7: The notion of risk in finance – The Capital asset pricing model
SESSION 8: The share value & the stock market analysis method
SESSION 9: The capital increase & the cost of capital
SESSION 10: Leverage Buy Out & Restructuring
SESSION 11: Consolidation methods & Off-balance sheet commitments
SESSION 12: What is a firm value? Understanding the limits of Finance.
Bibliography
Vernimmen Pierre, Corporate Finance: Theory & Practice, Dalloz, 2012
Vernimmen Pierre, Finance d’entreprise, Dalloz, 2013
www.vernimen.net
Année universitaire 2012/2013
1 ère année Master Droit Economique
semestre d’automne
1 Notice that this schedule is not binding: changes of any kind can be made all along the semester, including the date
of the exams and the content of the working program.

Class Schedule
INTRODUCTION & SESSION 1
Functions and main principles of Accounting & Finance – The balance Sheet
Key words: Financial statements, balance sheet, double entry accounting, assets, fixed assets, intangible
assets, liabilities, equity, debt, resources, uses, operating assets, debit, credit, immobilizations, Gearing
ratio, Net debt, Accounting Principles, IFRS, GAAP, IASB
SESSION 2
Financial statements (2/3): The income statement
Key words: P&L, margins, income statement, expense, charges, costs, sales, revenues, gross margin,
EBITDA, EBIT, Net income, Earning before taxes, profit
Presentations:
-­‐ The main principles of accounting
-­‐ What is amortization?
Memos:
-­‐ Operating Assets
-­‐ Fixed assets
-­‐ IFRS & US GAAP
-­‐ Expenses vs. investments: what is the difference?
-­‐
SESSION 3
Financial statements (3/3): The cash flow statement & Time value of money
Key words: rate of return, time value of money, present value, net present value, NPV rule, investment
decision, interest rate, business plan, discount rate, cash flow statement, opportunity cost, DCF formula,
perpetuity, capital expenditures
Case
Presentations:
-­‐ What is the value of money?
-­‐ “Cash is king!”: Explain.
Memos:
-­‐ Time value of money
-­‐ The income statement: definition, structure and uses
-­‐ Inventory & inventory changes account
-­‐ Free cash flows
SESSION 4
Financial analysis (1/2): introduction to the tools of strategy
Key words: Porter analysis, SWOT, Margin analysis, PESTEL, market share, volume effect, price effect, mix
effect, internal growth, external growth, fixed costs, variable costs, contribution margin
Presentation:
-­‐ Financial analysis: Apple
-­‐ What could the collapse of a firm’s turnover mean?
Memos:
-­‐ Porter analysis: use and limits
-­‐ Product life cycle
-­‐ Contribution margin
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SESSION 5
Financial analysis (2/2): from margin analysis to profitability analysis
Key Words: Permanent Working Capital, Working capital per day, inventory turnover, gearing ratio, liquidity,
net debt, gearing, leverage, break-even point
Presentations:
-­‐ What is the different between profitability ratios & margins analysis?
Memos:
-­‐ Break- even point: definition and use
-­‐ ROCE & ROE
-­‐ The leverage
SESSION 6
Mid-term
In addition to the Exam, this Session could be used as a back-up session.
SESSION 7
The notion of risk in finance – The Capital asset pricing model
Key words: financial markets, CAPM formula, Bêta, market efficiency, risk, risk premium, variance, Risk free
asset
Presentations:
-­‐ What are the main functions of financial markets?
-­‐ Is there a specific level of profitability required by financial markets?
Memos:
-­‐ Bêta
-­‐ Capital asset pricing model (CAPM) formula: risk premium and risk free asset
-­‐ The theory of efficient markets and the notion of arbitrage (market imperfection)
SESSION 8
The share value & the stock market analysis method
Key words: stakeholder, shareholder, market capitalization, market value, share, bond, EPS, PER, dividend,
PBR, Free float, Dividend per share, Dividend, Stock market analysis
Presentations:
-­‐ Stock market analysis of LVMH
-­‐ Stock market analysis of Société Générale
Memos:
-­‐ PER
-­‐ Dividend & Dividend policy
-­‐ Share vs. Bond
SESSION 9
The capital increase & the cost of capital
Key words: Capital increase, Pre-emptive subscription right, Real dilution effect, apparent dilution effect, call
option, value of the subscription right, TERP, WACC, Theory of signal, Earnings per share, Signaling theory,
value creation, Hybrid securities.
Presentations:
-­‐ The mechanisms of capital increase
-­‐ Presentation: What is a successful capital increase?
-­‐
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Memos:
-­‐ The signaling theory
-­‐ WACC
-­‐ Hybrid securities
-­‐ The pre-emptive subscription rights
-­‐ Capital decrease
SESSION 10
Leverage Buy Out & Restructuring
Special guests: Me Mathieu Della Vittoria & Me François Kopf, Scotto & Associés
Key words: parent company regimes, holding, hedge funds, Mezzanine debt, subordinated debt, junior debt,
senior debt
Cases
Memos:
-­‐ The parent company regime (in France)
-­‐ Debt structure: junior, senior & mezzanine debt
SESSION 11
Consolidation methods & Off-balance sheet commitments
Key words: consolidation, off-balance sheet commitments, minority interests, equity methods, proportional
integration, full integration, notes to the accounts, contingent asset, contingent liabilities
Presentations:
-­‐ The mechanisms of ENRON collapse
Memos:
-­‐ Consolidations methods
-­‐ The notes to the accounts
-­‐
SESSION 12
What is a firm value? Understanding the limits of Finance.
Key words: Multiples methods, Market multiples, Transaction Multiples, direct method, indirect method,
valuation by discounted cash flows, terminal value, peer group comparison, sum-of-the-parts method, net
asset value, premiums
Presentation:
-­‐ How could you assess the value of a firm?
-­‐ The mechanisms of the subprime crisis
Memos:
-­‐ Multiples method
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Introduction to the basics of accounting & finance
Fall semester 2012
ASSESSMENT CHART
Assessment will include both written and oral exercises based on Sciences Po & basic business
requirements. The aim of the assessment method is to provide a fair view of students’ involvement,
contributing to make them familiar with basic notions in finance. In order to reflect as much as possible
students’ real involvement and skills, 60% of the grade will depend on written exams while 40% of the grade
will depend on oral presentation and homeworks. Grades will be mostly based on criteria mentioned in the
Assessment grid available on Sciences Po ENTG.
1. Grading
2. Exercises description
a. Oral presentation
As in business life, the main objective of this exercise is to train students to perform oral
presentation in a limited period of time. To do this, Sciences Po basic requirements in terms of
oral presentation are fully applicable. Such exercise should contribute to develop students’
communication, analytical and team skills.
Requirements are detailed in the Assessement grid available on Sciences Po ENTG. Notice that
the presentation topic is closely tied to the content of the class.
ü� As in business life, Power Point shall be used as a support for the students’
presentation. Students could also use any kind of documents: tables, diagrams, press
articles etc.
ü� As in business life, students shall work in team (2 or 3 people).
ü� According to Sciences Po basic requirements, and as in business life, the presentation
shall not exceed 10 minutes.
ü� In order to make their presentation available to other students, a full written transcript
of the presentation will have to be communicated to the lecturer the day of the
presentation. Then, students shall post their transcript and documents in the class
ENTG.
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3. Press Review
The press review aims at underlying the link between the course theoretical approach and business
life. Students shall select event or situation found in economic and financial newspapers, highlighting
financial or accounting mechanisms. Press Review shall be lively. This exercise shall contribute to
develop analytical, oral and team skill.
ü� Students shall work in group of 2 or 3.
ü� Press Review shall not exceed 10 minutes.
ü� Documents used shall be posted on Sciences Po ENTG
4. Memo – « Fiche technique »
The Technical Memo / « Fiche technique » is a usual exercise characterizing Sciences Po teaching
method. The aim of the exercise is two write a short and accurate paper dealing with a basic notion.
The student shall grasp a deep understanding of the notion before making a short, exhaustive and
well organized paper covering the scope. The Technical Memo must be clear enough to be used for
the revision of other students that are not familiar with the notion. This exercise shall contribute to
develop analytical and writing skills.
Requirements are detailed in the Assessment grid available on Sciences Po ENTG.
ü� The Memo shall not exceed 2 pages (Times New Roman, 12).
ü� The Memo shall be returned to the lecturer the day planned in the class Schedule and
posted on the class ENTG to be available to other students
ü� Plagiarism will not be accepted. Quotations and sources shall be mentioned.
ü� The Memo shall be accurate.
ü� The Memo shall be well structured and easy to read in order to be used as learning tool
for other students. Bullet points may be used.
ü� Students shall take care to the form of the Memo.
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ASSESSMENT GRID
Grade Comments
A 20 - 18
B 18-16
C 16-14
D 14-12
E 12-10
§� Outstanding work: the requirements of the course
were fully met. In addition, student has shown great creativity in his
work.
§� Very good work: the requirements of the course
were fully met.
§� The presentation was cleverly structured including
a compelling introduction highlighting what was at stake and defining
the main key words. The conclusion shows that the topic of the
presentation was fully understood.
§� Perfect command of the key ideas. The content is
relevant including telling examples covering the entire scope. The form
of the presentation is perfectly clear and easy to understand for the
attendance, without exceeding the allocated time resource. Notions are
accurate and well explained.
§� Relevant documents were available and useful to
follow the presentation. Power Point was used for the presentation.
Appropriate diagrams and tables were used and commented.
Bibliography was provided and main sources were indicated. Transcript
of the presentation was available and communicated to the lecturer.
§� Good Work: the requirements of the course were
met although minor points could be improved.
§� The presentation was well structured including
relevant introduction and conclusion. Key notions were accurately
defined.
§� Expectations regarding the scope of the
presentation were met. Good examples were provided to sustain
students’ points.
§� Oral presentation was clear and easy to follow.
The presentation did not exceed the allocated time resource.
§� Documents were available and used for the
presentation. Transcript was available and communicated to the
lecturer
§� Satisfactory: the requirements of the course were
met although some points deserve a higher involvement.
§� The structure of the presentation is acceptable.
Introduction and conclusion briefly define the main notions.
§� The scope was mostly covered although some
points could have been included in the presentation. Some examples
were used. Key ideas and notions were understood.
§� Documents were available and correctly used.
Transcript was available and communicated to the lecturer.
§� Partially Satisfactory: the requirements of the
course are almost met or partially met. Nevertheless, more work is
needed to reach class expectations.
§� Presentation was structured although it was not
clear enough. Structure could be more relevant though. Introduction is
available but it could be improved especially regarding the quality and
the accuracy of the definitions.
§� Key ideas have been more or less understood
although compelling examples were not necessarily provided.
§� Oral presentation suggested superficial command
of the subject and may have been characterized by a lack of clarity.
Time requirements were not met.
§� The quality of the documents provided is fair
although it was not fully integrated to the presentation. Transcript is
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F / FX >10
roughly reliant.
§� Case 1: Student failed to reach some of the basic
requirements of the class both in terms of form and content. A much
higher involvement of the student is needed.
Case 2: Presentation is not available.
Case 3: Plagiarism (FX)
§� Structure of the presentation is not relevant or
even available. Key ideas were not defined and / or correctly
understood.
§� The scope of the presentation was not really
covered. Key ideas were not properly understood. Examples were not
provided.
§� Standards in terms of form were not met either.
Time requirements were not reached.
§� Documents were poor and transcript was not
available or is not reliant.
Introduction to the basics of accounting & finance
Fall semester 2012
ASSESSMENT FORM 2
Date Name Title of the presentation
Structure
of the
presentation
Form
of the
presentation
Content
of the
presentation
Relevance
of the
structure
Scope
covered by
the
presentation
Other
Length
Clarity
Quality of
the supports
Accuracy
Introduction
&
Definitions
2 Assessment is based on the criteria provided in the assessment grid available on Sciences Po ENTG.
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Examples
provided
Diagrams &
Tables
A 20-18 Comments:
B 18-16
C 16-14
D 14-12
E 12-10
F > 10
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