Investment Account

obligatory courses

Course prerequisites

Finance, Excel, Accounting, Managerial accounting, management

Official requirements

Ability of analysing financial statements, understanding of stock investments, analysis of business conditions

Introductory guidelines

Finance, Excel, Accounting, Managerial accounting, management

Goal of the course is to present to students practical aspects of investing. There are three main topics, merging finance, accounting, financial mathematics and Excel together. Course consists of three blocks: a) portfolio optimization – Markowitz model, b) business plan analysis, c) firm valuation with use of discounted cash flow method. Course is run as practical workshop – students in groups prepare and present reports, what is the basis for passing.

The course consists of three thematic blocks. In every block students prepare and present group project.

Block A: Portfolio optimization – Markowitz model

- valuation of companies and sectors, expected changes on Stock Exchange

- analysis of historical data of stock prices: variance-covariance matrix (in time window), correlation of returns, beta

- portfolio optimization using Solver in MS Excel, finding weights in portfolio

Students are expected to present short report on investing in selected companies.

Block B: Evaluating a business-plan

- consistency of the business plan with financial statements (profit and loss account, balance sheet)

- identification of errors in a business plan and their correction

- project quality assessment, forecast of the profitability of the project

As part of this block, students prepare a short report on the correction of a business plan.

Block C: Firm valuation with use of discounted cash flow method

- firm assessment and its business environment

- forecasts for company and sector

- historical analysis – average price in quarters

- prospective analysis – determinants of firm’s Cash Flow

- firm valuation: finding CF, WACC estimation, residual value estimation, firm valuation, recommendation

Students are expected to present short report – recommendation on possible investment in given company.

- Glynn J., Perrin J., Murphy M., 2003, Rachunkowość dla menedżerów, Wydawnictwo Naukowe PWN, Warszawa

- Machała R., 2004, Praktyczne zarządzanie finansami firmy, Wydawnictwo Naukowe PWN, Warszawa

- Jajuga K., Jajuga T., 2006, Inwestycje. Instrumenty finansowe, aktywa niefinansowe, ryzyko finansowe, inżynieria finansowa, Wydawnictwo Naukowe PWN, Warszawa

- Sierpińska M., Jachna T., 2007, Metody podejmowania decyzji finansowych. Analiza przykładów i przypadków, Wydawnictwo Naukowe PWN, Warszawa

a) Knowledge

1. The student knows how the stock market works, understands the relationship between the stock exchange, the economy and a single company, knows how to use this information to conduct stock market investments.

2. The student knows how a business plan should be written, the stages of preparing the investment process, and the formal and practical requirements related to the opening new business.

3. The student understands what is the relationship between the company's value, its characteristics, market situation and investors' attitude. The student knows what are the methods of forecasting the development of the company and the industry, and of forecasting their future values.

b) Skills

1. The student is able to construct an investment portfolio using the Markowitz model, is able to collect and analyze stock market data, economic and financial data.

2. The student is able to assess and correct a business plan, analyze the consistency of a business plan with financial statements (profit and loss account, balance sheet), identify technical errors and correct them, assess the project quality and forecast its profitability.

3. Student is able to evaluate the company using the discounted cash flow method: assess the company and its business environment, make industry and company forecasts, perform a historical and prospective analysis, present the company's Cash Flow, estimate WACC and residual value.

4. The student is able to carry out quantitative analyzes, select information and write a synthetic report.

c) Social competences

1. The student is able to work in a group, cooperate with other people to solve practical problems.

2. The student is able to search for the necessary information and knowledge needed to solve the problem.

KU05, KU06, KK01, KK03, KU04, KU03. KU02, KU01, KW03, KW02, KW01

Reports and presentations of students are evaluated according to detailed criteria given during the first class. The final grade is the weighted average of the results obtained in each of the three blocks. Both the report and the presentation, their completeness, compliance with expectations and timeliness are taken into account. Students can get 10% of points for particularly good results of their investment portfolio. Only one absence in each block is allowed.