Taxation and Decision Making
Students aspiring to be decision-makers in the Business World should take this course. Virtually all business transactions involve an income tax component and transactions can often be structured to achieve a more favourable tax treatment, while still achieving the overall objectives of the transaction. In order to understand and compare these transactions, one has to have a general understanding of the tax rules.
This course will develop a student’s ability to identify, understand, and evaluate tax-planning opportunities and will provide an overview of the income tax system and how it impacts business and investment decisions. The material will focus on tax planning concepts and the effect of taxes on business decisions, rather than detailed tax rules and legal research. We begin by developing a conceptual framework for evaluating how tax rules affect financial decisions. The framework is then applied to various types of financial decisions, including savings vehicles, compensation planning, international tax issues, financial statement analysis, capital structure, and mergers, acquisitions, and divestitures.
The objectives of the course are achieved through a combination of lectures, selected current readings and the application of the concepts to problems and cases. After taking this course students are expected to be able to identify the key income tax issues associated with business and investment activities, have a conceptual understanding of the income tax implications of the issues identified, and analyze alternatives on an after-tax basis.
Financial Statement Analysis
Basically, all MBA students could, and should, take the course. In particular, students interested in careers in consulting, corporate finance, equity research, investment banking, and anybody who wants to run a corporation.
The objective of this course is to develop a set of tools for in-depth financial statements analysis and valuation. This course emphasizes the theme of the “Accounting Art of War” (paraphrasing Sun Tzu) and extends it. The class emphasizes analysis rather than mechanical work.
In order to analyze financial statements and the reporting strategy of companies we need to understand the underlying motivation of management to shade their financial statements in the way it best serves their overall strategy. The course builds upon the foundation established in the first year course in Financial Accounting, and thus assumes a basic familiarity with financial statement preparation using accrual accounting. The course emphasizes an integrative approach and, as such, has strong links with economics, marketing, finance and strategy. Consistent with this goal we use a textbook that applies a strategic framework to analyze companies.
Predicting the past, as opposed to predicting the future, is not a useful goal, Consequently, beyond case analyses (predicting the past) the course has in it a project to analyze real companies in real time applying all of the tools taught up to that point in the course (predicting the future).
The course has in it three modules:
- Global and strategic analysis of profitability and risk
- The Accounting Art of War
- Forecasting financial statements, valuation and reverse engineering of stock prices
Each of these modules has in it a lecture part, a case study to test our knowledge and the analysis of real companies in real time.
Financial Distress and Insolvency
Students who wish to know what alternative courses of action are open to them in cases of financial instability and corporate insolvency - whether they are managers, directors, creditors or turnaround specialists.
This course examines the process of corporate bankruptcy in Canada including exposure to the language of insolvency, identification of key players in insolvency, identification of the advantages of selecting certain insolvency regimes over others, corporate governance issues in distressed firms, exploration of instability prediction models and turnaround strategies for firms in financial difficulties as well as additional topics of interest to managers.
Financial distress is part of the normal business environment with thousands of businesses going bankrupt every year in Canada alone. Since bankruptcy is a significant presence in the business environment, the objective of this course is to introduce students to the theoretical concepts and practical realities of financial instability and insolvency including the language and key players, the legal and management processes needed to ensure not only that there is as high a return to creditors and equity holders as possible in the circumstances but that the regulatory requirements have been fulfilled. Students are also introduced to short term metrics and longer term models used to predict bankruptcy as well as turnaround strategies available to troubled companies. The intention of this course is to show students that they often have options in instability and insolvency situations whether they are managers, directors, creditors or equity holders. All second year MBA students are welcome.
Students interested in understanding how the legal environment interacts with the business environment. Students interested in studying current cases that illustrate the dynamic interaction of business and law in today’s business environment.
This course is intended to focus participant’s attention on those areas of law that typically effect a business’s operations. In addition, we will examine those areas of law that reflect on the role of directors and officers. Recent case law provides numerous examples that illustrate the conflicting roles managers often find themselves in.
Businesses operate within a complex environment of legal issues. Management must be able to not only recognize these issues, but also have an understanding of how to resolve them effectively and efficiently. This requires an appreciation of the Canadian legal system and the way that legal experts can offer assistance. The material will be examined through cases that reflect the legal principles being discussed during the class sessions. Participants will be expected to do some further legal research to complete assignments.
Advanced Value Capture Strategies: Theory and Applications
MBA students in the Full-Time and Morning/Evening MBA programs who have completed their required courses and are interested in pursuing a career in which they will be expected to think critically and analytically about issues related to firm strategy, business models, diversification, innovation, and market entry and exit and how these things integrate to determine a firm’s overall strategy and resulting market value. This includes careers in consulting, internal strategy or finance roles, investment banking, venture capital and entrepreneurship.
- Develop a working understanding of the mathematics of the value capture model, its logical structure, and its interpretation;
- Become skilled in applying the framework to making strategic business decisions in special settings, including but not limited to:
- Setting firm boundaries
- Operating in platform markets
- Innovation and commercialization strategies
- B-to-B relationships
- Grasp insights from scholarly empirical work in the area of value capture theory;
- Develop the ability to coalesce these principles into integrated strategies at the corporate level
Built on a formal, game-theoretic foundation, the Value Capture Model (VCM) provides a modern, integrative, and prescriptive approach to developing high-performance business strategies. The VCM is nicely introduced in Rotman’s first-year strategy core. However, there is much more to this framework than can be covered in a broad, core course. The purpose of this elective is to take a deep dive into Value Capture Theory, both in terms of understanding and application to real-world business strategy.
Over the past decade, we have been deeply involved in both developing the underlying research and translating it into teaching content targeted at MBA students. One of the salient features of this work is that it treats firms as unified wholes that operate within complex value networks designed to create and capture economic value. In doing so, it forces students to think about how things like resources, activities, industry structure, and the competitive landscape (ideas introduced in the first year Starety core course) fit together in an integrated way. This course will be organized into three parts. It will begin by elaborating the formal details of the general value capture model using mathematical notation that we have developed to make the theory both analytically rigorous and accessible to students. Then, students will learn to apply the general theory to particular strategic decisions, such as those involving innovation, pricing, or horizontal diversification. Finally, all the pieces will be brought together to show students how to use the theory to develop an overarching, integrated business strategy with a focus on medium and long-run performance (as opposed to a single decision or particular economic opportunity). Throughout the course, the focus will be on translating insights from research to practice and helping students understand how ideas get ‘commercialized’ from the academic whiteboard to real-world practice.
Business Analysis and Valuation
Anyone pursuing a career where one needs to analyze financial statements “intelligently.” This obviously includes those interested in finance related professions such as Investment Banking, Research and Investment Management. Students interested in consulting and marketing also find this course useful because of its approach that focuses on business analysis with tie-ins to corporate strategy.
This course will help you value businesses using financial statements. We will discuss how accounting regulations and managerial discretion influence presented financial statements. You will understand how to interpret financial statements, analyze cash flows, make judgments about earnings quality and uncover hidden assets and liabilities. You will also be exposed to research from accounting and finance that focuses on how financial statement analysis can be used in devising trading rules. Finally, we will use financial statement analysis prospectively to forecast and value firms using cash flow based and accounting based methods.
The course will consist of the following five modules. In the first module (strategic and industry analysis) you will learn why the critical first step is to understand industry structure and a company’s strategic choices. The second module (accounting analysis) will provide you with a framework to understand and evaluate a firm’s accounting and disclosure choices and learn how to adjust financial statements to ensure better comparability. The third module (financial analysis) will present a comprehensive framework for ratio analysis where a firm’s operations are separated from its financing to better understand the true drivers of profitability and risk. The fourth module (prospective analysis) will expose you to techniques of integrated forecasting, where you will apply the insights from the earlier modules and apply them to truly understand what the future holds for the firm being analyzed. You will then use these forecasts to value firms using a variety of techniques including DCF, multiples and abnormal earnings based valuation methods. In the fifth module, you will apply the business valuation techniques in a variety of settings including credit analysis, security analysis and M&A.