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Richard Lambert and Robert W. Holthausen

This course is designed to show you how use quantitative models to transform data into better business decisions. You’ll learn both how to use models to facilitate decision-making and also how to structure decision-making for optimum results. Two of Wharton’s most acclaimed professors will show you the step-by-step processes of modeling common business and financial scenarios, so you can significantly improve your ability to structure complex problems and derive useful insights about alternatives. Once you’ve created models of existing realities, possible risks, and alternative scenarios, you can determine the best solution for your business or enterprise, using the decision-making tools and techniques you’ve learned in this course.

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What's inside

Syllabus

Evaluation Criteria: Net Present Value
This module was designed to introduce you to the many potential criteria for selecting investment projects, and to explore the most effective of these criteria: Net Present Value (NPV). Through the use of concrete examples, you'll learn the key components of Net Present Value, including the time value of money and the cost of capital, the main utility of NPV, and why it is ultimately more accurate and useful for evaluating projects than other commonly used criteria. By the end of this module, you'll be able to explain why net present value analysis is the appropriate criteria for choosing whether to accept or reject a project, and why other criteria, such as IRR, payback, ROI, etc. may not lead to decisions which maximize value.
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Evaluating Projects
In this module, you'll learn how to evaluate a project with emphasis on analyzing the incremental after-tax cash flows associated with the project. You'll work through a concrete example using alternative scenarios to test the effectiveness of this method. You'll also learn why only future cash flows are relevant, why to ignore financial costs, include all incidental effects, remember working capital requirements, consider the effect of taxes, forget sunk costs, remember opportunity costs, use expected cash flows, and perform sensitivity analysis. By the end of this module, you'll be able to evaluate projects more thoroughly and effectively, with emphasis on how to model the change in the company’s after-tax cash flows, so that you can make more profitable decisions.
Expressing Business Strategies in Financial Terms
This module was designed to give you the opportunity to learn how business activities, transactions and events are translated into financial statements, including balance sheets, income statements, and cash flow statements. You'll also learn how these three statements are linked to each other, and how balance sheets and income statements can help forecast the future cash flow statements. By the end of this module, you'll be able to explain how accounting systems translate business activities into financial terms, and how to use this to better forecast future cash flows, so that you can express your business strategies in these financial terms, and show "the bottom line" for your proposed plan of action.
New Product Value
In this module, you'll apply what you’ve been learning to an analysis of a new product venture. You’ll learn how to map out a plan of the business activities, transactions and events that need to happen to implement the new venture, including their timing. You'll also learn how to set up a spreadsheet to help with forecasts, and to re-calculate things automatically as we re-think our plans. You'll see how to forecast out the implied financial statements, and calculate the Net Present Value (NPV). By the end of this module, you'll be able to use spreadsheets to explore different risks a venture may face, and analyze the implications of these scenarios for NPV, so that you can make the most profitable, data-driven decision possible.

Good to know

Know what's good
, what to watch for
, and possible dealbreakers
Examines financial terms and risks, which are key principles of business and finance
Provides concrete examples and case studies to reinforce learning
Introduces financial modeling with NPV, a widely-used technique in the industry
Provides opportunities to apply knowledge to real-world business scenarios
Taught by Wharton professors, known for their expertise in finance and business

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Reviews summary

Deeply engaging decision science

Learners say that this course is highly recommended as it is highly engaging, informative, and provides great information and excellent examples. Students suggest that completing this course may lead to better and more profitable business decisions.
Lots of great content
"Great course. Excellent examples. Tons of great information shared."
"Great thought provoking informative course on making better and more profitable business decisions utilizing various scenarios."
Professors are experts
"The Wharton professors presenting are clearly knowledgeable about the subject matter."
Better business decisions
"Great thought provoking informative course on making better and more profitable business decisions utilizing various scenarios."
Invaluable scenarios
"Great course. Excellent examples"
"Tons of great information shared."

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Decision-Making and Scenarios with these activities:
Review basic accounting principles
Review the fundamental concepts of accounting, such as debits and credits, the balance sheet, and the income statement, to strengthen your understanding of financial modeling.
Browse courses on Accounting Basics
Show steps
  • Read introductory accounting materials (e.g., textbooks, articles, online resources).
  • Solve practice problems or take online quizzes to test your understanding of basic concepts.
  • Attend a workshop or seminar on accounting basics.
Compile a glossary of financial terms and concepts
Create a comprehensive glossary of key financial terms and concepts covered in the course, including definitions, examples, and real-world applications. This resource will serve as a valuable reference tool for future use.
Show steps
  • Identify and list important financial terms and concepts from course materials.
  • Define each term or concept concisely and clearly.
  • Include examples or real-world applications to illustrate the meaning.
Review Fundamentals of Corporate Finance
Review the basics of corporate finance. This book will describe the principles and practice of corporate finance from the perspective of managers and investors.
Show steps
  • Read Chapter 1: Introduction
  • Read Chapter 2: The Financial System
Ten other activities
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Show all 13 activities
Watch Videos on Financial Modeling
Expand your knowledge of financial modeling by watching videos from experts.
Browse courses on Financial Modeling
Show steps
  • Watch a video on how to build a financial model in Excel
  • Watch a video on how to use financial modeling to make better investment decisions
Learn how to use Excel for financial modeling
Become proficient in using Excel's financial functions and tools, such as NPV, IRR, and data tables, to enhance your ability to create and analyze financial models.
Show steps
  • Enroll in an online course or workshop on Excel for financial modeling.
  • Follow tutorials on specific Excel functions and techniques.
  • Practice using Excel to solve financial modeling problems.
Solve NPV and IRR Practice Problems
Practice applying NPV and IRR to evaluate investment projects. This will help you understand how to use these techniques to make better investment decisions.
Show steps
  • Solve 5 NPV practice problems
  • Solve 5 IRR practice problems
Attend a Financial Modeling Workshop
Learn from experts in the field of financial modeling by attending a workshop.
Browse courses on Financial Modeling
Show steps
  • Research financial modeling workshops
  • Register for a workshop
Join a study group or online forum to discuss course concepts
Engage with other students to discuss course concepts, ask questions, and share insights. This collaborative learning experience can deepen your understanding and identify areas where you need additional support.
Show steps
  • Join an existing study group or online forum related to the course.
  • Participate actively in discussions and ask thoughtful questions.
  • Share your own insights and perspectives with the group.
Volunteer at a non-profit organization focused on financial literacy
Gain practical experience in applying financial modeling concepts to real-world scenarios while making a positive impact in your community. This volunteering opportunity will enhance your understanding and provide valuable hands-on experience.
Show steps
  • Research non-profit organizations that focus on financial literacy.
  • Identify volunteer opportunities that align with your interests and skills.
  • Reach out to the organization to inquire about volunteering.
Write a Blog Post on a Financial Topic
Share your knowledge of finance by writing a blog post on a financial topic. This will help you to reinforce your understanding of the concepts and to communicate them effectively to others.
Browse courses on Financial Literacy
Show steps
  • Write a blog post
  • Choose a financial topic
  • Research the topic
Develop a Business Plan for a New Venture
Demonstrate your ability to apply the concepts of financial analysis and business planning by developing a business plan.
Browse courses on Business Planning
Show steps
  • Identify a business opportunity
  • Develop a business model
  • Create financial projections
Develop a financial model for a proposed business venture
Apply your knowledge of financial modeling to create a comprehensive model that forecasts the financial performance of a hypothetical business venture, allowing you to assess its viability and make informed decisions.
Show steps
  • Identify a hypothetical business venture to model.
  • Gather relevant financial data and assumptions.
  • Build a financial model in Excel or other financial modeling software.
  • Analyze the results of the model and draw conclusions about the venture's financial feasibility.
Analyze a Real-World Investment Opportunity
Put your skills to the test by analyzing a real-world investment opportunity. This will give you practical experience in applying the concepts of financial analysis and decision-making.
Browse courses on Investment Analysis
Show steps
  • Identify an investment opportunity
  • Analyze the financial statements
  • Evaluate the investment opportunity using NPV and IRR

Career center

Learners who complete Decision-Making and Scenarios will develop knowledge and skills that may be useful to these careers:
Financial Analyst
Financial Analysts apply their understanding of financial markets and data to analyze a company's or individual's financial health. This course can be particularly valuable, as it helps build a foundation in analyzing financial data to make sound investment decisions. By mastering the techniques taught in this course, you will be able to assess the risks and returns of investments more effectively, thus contributing to more profitable outcomes for your clients or organization.
Investment Banker
Investment Bankers provide financial advice to corporations and governments, helping them raise capital and make strategic decisions. This course can be highly beneficial as it offers tools and techniques to evaluate investment projects and make sound financial decisions. Leveraging the knowledge gained from this course, you'll be able to better assess the viability of investment opportunities and provide more informed advice to your clients.
Portfolio Manager
Portfolio Managers make investment decisions for individuals and institutions, managing their financial portfolios. This course can be a valuable asset, providing you with the skills to evaluate investment opportunities, allocate assets, and manage risk. By applying the principles taught in this course, you can enhance your ability to build and manage successful investment portfolios for your clients.
Financial Planner
Financial Planners help individuals and families manage their financial resources and plan for the future. This course can be beneficial as it provides a framework for evaluating financial scenarios and making informed decisions. By mastering the concepts covered in this course, you'll be able to better assist your clients in achieving their financial goals.
Risk Manager
Risk Managers identify, analyze, and mitigate potential risks for businesses and organizations. This course can be valuable as it provides techniques to assess and manage financial risks. By applying the knowledge gained from this course, you'll be better equipped to develop and implement effective risk management strategies, enhancing the financial stability of your organization.
Auditor
Auditors examine financial records and ensure compliance with regulations, providing assurance on the accuracy and reliability of financial information. This course can be beneficial as it offers a foundation in financial analysis and accounting principles. By understanding the techniques taught in this course, you'll be better able to evaluate financial statements, detect irregularities, and ensure the integrity of financial reporting.
Consultant
Consultants provide expert advice to businesses and organizations on various aspects of their operations, including financial management. This course can be helpful as it equips you with analytical skills and problem-solving techniques. By leveraging the knowledge gained from this course, you'll be better able to analyze business scenarios, identify areas for improvement, and develop data-driven recommendations for your clients.
Data Analyst
Data Analysts collect, clean, and analyze data to identify trends and patterns. This course can be a valuable asset as it provides a foundation in data analysis and modeling techniques. By mastering the concepts taught in this course, you'll be able to effectively analyze and interpret data, derive meaningful insights, and contribute to data-driven decision-making within your organization.
Business Analyst
Business Analysts identify and analyze business needs and develop solutions to improve efficiency and performance. This course can be beneficial as it provides a framework for evaluating business scenarios and making data-driven decisions. By understanding the techniques taught in this course, you'll be better equipped to gather and analyze data, identify areas for improvement, and develop effective solutions for your organization.
Project Manager
Project Managers plan, execute, and deliver projects within specified constraints. This course can be helpful as it offers a structured approach to project evaluation and risk management. By applying the knowledge gained from this course, you'll be better able to analyze project scenarios, assess potential risks, and develop effective strategies to ensure successful project outcomes.
Actuary
Actuaries use mathematical and statistical techniques to assess and manage financial risks and uncertainties. This course can be a valuable foundation as it provides a strong understanding of financial modeling and risk analysis. By mastering the concepts taught in this course, you'll be better equipped to develop and implement actuarial models, evaluate risk profiles, and make informed decisions in the face of uncertainty.
Economist
Economists study the production, distribution, and consumption of goods and services. This course can be beneficial as it offers a framework for analyzing economic data and trends. By understanding the principles taught in this course, you'll be better able to interpret economic indicators, forecast economic conditions, and develop informed strategies for businesses and organizations.
Statistician
Statisticians collect, analyze, interpret, and present data. This course can be a valuable foundation as it provides a strong understanding of statistical methods and data analysis techniques. By mastering the concepts taught in this course, you'll be better equipped to design and conduct statistical studies, analyze data, and draw meaningful conclusions from your findings.
Operations Research Analyst
Operations Research Analysts use mathematical and analytical techniques to improve the efficiency and effectiveness of operations. This course can be beneficial as it offers a foundation in modeling and optimization techniques. By understanding the principles taught in this course, you'll be better able to analyze operational scenarios, identify areas for improvement, and develop data-driven solutions to optimize your organization's performance.
Quantitative Analyst
Quantitative Analysts use mathematical and statistical models to analyze financial data and make investment decisions. This course can be a valuable foundation as it provides a strong understanding of financial modeling and data analysis techniques. By mastering the concepts taught in this course, you'll be better equipped to develop and implement quantitative models, analyze financial data, and make informed investment decisions.

Reading list

We've selected 43 books that we think will supplement your learning. Use these to develop background knowledge, enrich your coursework, and gain a deeper understanding of the topics covered in Decision-Making and Scenarios.
Provides a comprehensive overview of corporate finance, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students who want to learn more about the financial decision-making process.
Provides a comprehensive overview of investment management, covering topics such as asset allocation, portfolio management, and risk management. It valuable resource for students who want to learn more about the investment process.
Provides a comprehensive overview of corporate finance, covering topics such as capital budgeting, cost of capital, and dividend policy. It good resource for students who want to learn more about the financial aspects of business.
Provides a detailed guide to valuation methods, including discounted cash flow analysis, comparable company analysis, and precedent transactions. It valuable resource for students who want to learn how to value businesses.
Provides a comprehensive overview of investment analysis and portfolio management, covering topics such as risk and return, asset allocation, and performance evaluation, offering both depth and additional perspectives.
Provides a step-by-step guide to financial modeling, covering topics such as data collection, model building, and sensitivity analysis. It useful resource for students who want to learn how to create and use financial models.
Provides a comprehensive overview of financial risk management. It covers the latest techniques for managing financial risk, such as the use of derivatives and risk models. It is commonly used as a textbook at academic institutions and by industry professionals.
Provides a comprehensive overview of investment analysis and portfolio management, covering topics such as asset allocation, risk management, and performance evaluation. It good resource for students who want to learn more about the investment process.
While not directly targeting business decision-making, this book offers a solid foundation in derivatives, which can enhance understanding of risk management and scenario analysis covered in the course.
Provides a comprehensive overview of corporate finance, covering topics such as capital budgeting, capital structure, and dividend policy. It valuable resource for students who want to learn more about the financial decision-making process.
Explores the psychology of decision-making, emphasizing the importance of probability and risk assessment, aligning well with the course's focus on scenario analysis.
Explores the role of uncertainty and rare events in decision-making, complementing the course's emphasis on scenario analysis and risk management.
Classic guide to value investing. It provides investors with a framework for making sound investment decisions. It valuable resource for students who want to learn more about the investment process.
Provides a theoretical framework for corporate finance. It covers the latest research on topics such as capital structure, investment decisions, and corporate governance. It is commonly used as a reference by industry professionals.
Provides a comprehensive overview of fixed income securities. It covers the basics of these instruments, including their pricing, risk management, and applications. It is commonly used as a textbook at academic institutions and by industry professionals.
Provides a comprehensive overview of options, futures, and derivatives. It covers the basics of these instruments, including their pricing, risk management, and applications. It is commonly used as a textbook at academic institutions and by industry professionals.
Provides a practical framework for developing and evaluating strategies, enhancing the course's focus on decision-making and scenario planning.
Classic guide to security analysis. It provides a detailed framework for analyzing stocks and bonds. It valuable resource for students who want to learn more about the process of security analysis.
Provides a practical guide to business valuation, focusing on the key concepts and techniques used in the field, complementing the course's emphasis on financial analysis.
Classic guide to security analysis. It provides investors with a framework for evaluating the risk and return of different investments. It valuable resource for students who want to learn more about the investment process.
This ancient Chinese military treatise offers timeless wisdom on strategy and decision-making, providing a unique perspective that can complement the course's focus on quantitative models.
While not directly related to financial modeling, this book offers valuable insights into the iterative and experimental approach to decision-making, complementing the course's emphasis on scenario analysis.
Provides a simple and straightforward guide to investing. It valuable resource for students who want to learn more about the investment process.
Provides a comprehensive overview of the economics of money, banking, and financial markets. It good resource for students who want to learn more about the financial system.
Provides a comprehensive overview of investments, covering topics such as asset allocation, risk management, and performance evaluation. It good resource for students who want to learn more about the investment process.
Provides a step-by-step guide to financial modeling and valuation, covering topics such as data collection, model building, and sensitivity analysis. It useful resource for students who want to learn how to create and use financial models.
Provides a comprehensive overview of investment analysis and portfolio management, covering topics such as asset allocation, risk management, and performance evaluation. It good resource for students who want to learn more about the investment process.
Provides a guide to detecting accounting gimmicks and financial fraud. It valuable resource for students who want to learn more about the risks of investing.
Provides a unique perspective on the financial markets. It valuable resource for students who want to learn more about the art of investing.
Provides a unique perspective on the risks of investing. It valuable resource for students who want to learn more about the importance of diversification.
Provides a fascinating account of the 2008 financial crisis. It valuable resource for students who want to learn more about the risks of investing.
Provides a fascinating account of the history of money. It valuable resource for students who want to learn more about the role of money in society.

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