In this single-video course, Professor Pratt demonstrates how properly managing the key determinants of return on equity (ROE) increases the value of the firm.  He first provides a brief summary of the relevant features of the time value of money with a special emphasis on the internal rate of return, and then he demonstrates what it exactly means to create shareholder value.  The ROE model is then introduced and fits into a value creation framework, followed by an intuitive and straightforward present value analysis that shows how improving ROE can drive up the value of the firm.  Professor Pratt then uses a spreadsheet, in which the model has been programmed, to conduct an analysis of the current market value of Best Buy, the well-known electronic equipment retailer.  The viewer is then guided through some sensitivity analysis designed to highlight which financial metrics are most important to driving up Best Buy’s market value.  The overall theme of this course is that understanding this system provides a guide to identifying where management should focus its attention in its effort to increase the value of the firm, and due to their special understanding of financial statements, accountants are in an excellent position to take full advantage.

Course 11 Learning Objectives

• Use the concept of interest and the time value of money.
• Define value creation.
• Link value creation to return on equity and how it is affected by management’s operating, investing, and financing decisions.
• Use a spreadsheet-based valuation model using ROE inputs.
• Compute the inherent value of Best Buy.
• Describe how this valuation framework should be interpreted and used, which includes conducting sensitivity analysis on the model’s key inputs.

Single Video Course Note

The ROE Model and Firm Valuation course is a single video lecture course which means there will be pauses in the video where you are prompted to answer knowledge check questions.  We highly recommend that you watch the video lecture and answer each associated knowledge check question only when you are prompted to do so. However, each of the knowledge checks associated with the lecture video can be accessed in sequence after the assessment quiz. The knowledge checks have been made available in this manner for easy access for review in the future.

Course Components

1. PRATTedu Resources
2. PRATTedu Program Structure
3. Ethics and Earnings Management + Knowledge Checks
4. Assessment Quiz (must score 70%)

CPE Requirements

1. The assessment Quiz must be completed satisfactorily no later than one year after enrollment, at which time your access to the website will expire.
2. A 70% minimum score on the Assessment Quiz is required for satisfactory completion and to receive a certificate.

Course Navigation

Main Course Page Navigation (Current Page)

The main course page for each course consists of 6 sections: (1) Course description; (2) Learning objectives; (3) Course components; (4) CPE requirements; (5) Course navigation; and (6) the master course navigator, which allows you to quickly jump to the various lessons that make up the course. The course structure and resources, the course videos, and the final assessment quiz.

Master Course Navigation

Simply complete the lessons in order. At the bottom of each lesson, are two buttons: Previous Lesson or Next Lesson. We also include excerpts in the buttons so you can quickly identify the content in each direction. You can always go back to the beginning of the course (course intro page) by clicking the “back to Course 1 – Introduction to Financial Statements link. Note: At the bottom of each completed lesson (right above the previous/next buttons) it will state “Complete Lesson” make sure you click it before moving on.

MAKE SURE YOU GET YOUR CERTIFICATE! Please read below:

You must mark each page of our courses as complete for our system to register for completion of a course and generate a certificate. The Structure and Resources section is typically missed by many users, simply scroll to the bottom of each page and click the blue “Mark Complete” button and enjoy your course!

Course Information

Estimated Time: 1.16 Hours | 2 CPE Credit

Course Instructor

Author