Wednesday, 30 September 2009

Why is it called an MBA?

It is true but out there are hundreds of people prepared to pay serious money to undertake my course in financial analysis. This is no ordinary course - FANA as it is called is an option on the Manchester Business School MBA - and FANA has the reputation for being the toughest, one semester course in finance on the planet. But several graduates of the programme have gone on to do CFA and all report back: after FANA, CFA was a roll over. So round the world I go teaching financial analysis, using the Manchester Method, to willing students of the black arts of finance.

Why is FANA so popular, why is it that I find professionally qualified CPA's, ACA's, ACCA's ready and waiting? Truth is I don't know. I suspect it may be that they have heard that it is taught with real companies using my Living Case Method. What is true is that they realise that even a professional qualification is little help - OK, they may know the ins and outs of IFRS 29 but what about the basics? How do you work out the cost of capital for a company without relying on the numbers produced by the data warehouses? How do you sort out whether and to what degree the accountants have been cooking the books, how do you unravel the cost structure of a company and hence its exposure to operating risk? That's the easy bit but what about unpicking the financials as a preliminary to valuation and what about the additional value to equity generated by leverage? All of these questions and more get answered.

It has been said that the trouble with professional qualifications is that if something cannot be examined in 45 minutes then it cannot be taught. Certainly my many years of professional examining confirms me in that particular prejudice. But, nothing gives me greater pleasure than watching the professional accountant's self belief unravel because I know that is the first step in really becoming a master of the black arts of finance. I suppose that's why the ultimate qualification is called an MBA.


Anonymous said...

Hi Bob, no doubt about it that your method using real life companies makes your course interesting to the students and also gives them confidence for the real world. In fact, one does not have to spend a lot of money on MBA level finance courses. I'm following the Damodaran Corporate Finance and Valuation classes online (on his website in the form of webcasts) and they're really excellent. He also uses real life companies in his classes. Would you agree that these classes are also a good basis for the famous P4 exam? :-) Thanks for a reply.

Anonymous said...

Prof Bob's methodology and knowledge are not only excellent but also combine to be an impeccable learning process.

FANA module is an essential trick taught in the Manchester MBA. It is a toolkit not only useful by itself but also useful as part of management.

Poh said...

I am a CFA charteredholder and CA, having attended your workshop in KL finds it interesting on the option valuation theory and real work company (e.g Rolls Royce) analysis even though these are examined in CFA Level I & II. The weaknesses of the workshop is the analytical accounting adjustments not being taught deeply in your workshop where these consist of majority of financial analysts' works and key to CFA LeveI & II exams. I would suggest to professor Bob that at least certain accounting areas (e.g. revenue recognition, pension funds, Inventories, borrowing costs and R&D capitalization, deferred tax and assets,fair value and financial instruments valuation) which are likely target for earnings management being taught clearly by using real life company's notes to the accounts, though it is challenging for you to teach in 3 days workshop!

To certain extent, I disagree that after attending your workshop, CFA will be easier to pass especially for people without strong financial background (e.g. I see a lot of engineers/even accountants are struggling on this workshop even though they manage to understand the process of valuation!) and the Level III CFA exam is gear toward portfolio management (e.g. combine equity, alternativ investments, fixed income and their respecitve derivatives and behavioural finance) which are difficult and not even touched in your workshop.

But, overall, I enjoy meeting with you and attending your workshop.

Benjamin Poh

Anonymous said...

Having been through Bob's FANA module I cannot agree with Benjamin's analysis. As a CA and a CFA I think FANA offers a dimension that the rather myopic professional examinations miss. Its true as another contributor has said that Damodaran uses company examples but the intensity and focus of the MBS approach is far superior. Bob is right that professional courses focus on what can be examined and unless they tie in with relevant professional experience they can be meaningless. What FANA gives is a holistic approach and a methodology which whilst not completely unique is brilliantly done. It could not be done if the whole workshop was spent fiddling about with the notes to the accounts. What I also found transforming was how FANA helped me integrate finance and financial accounting and particularly the way that Bob took valuation beyond DCF. Now working as an equity analyst at an investment bank FANA (and the rest of the MBA) has done far more for me than CFA which is really little more than a ticket to ride.

Professor Bob Ryan said...

Hi Benjamin - useful comments but one of the things I discovered as an accountant is that it gives you a taste for the detail and not the big picture. I guess in the end that is what professionalism is all about.

What I think FANA is about is helping many students (who are not accountants) to use their strengths to bridge the gap into finance and financial analysis, and those who are accountants to get a much clearer structure on their work. The research based approach to analysis is very powerful - contextual understanding of the research issue, asking the right questions, drilling into the published information until you get answers, forming robust conclusions - is not one emphasised in the CFA or the accounting syllabuses. Sadly many years of examining for professional exams at final level have taught me that. Research and the way you do it is, in large measure, what universities are about.

However, my biggest criticism of the CFA is that it elevates method over judgement. The professional, in the end, trades on the proposition that he or she has, at their disposal, a toolkit for solving problems. There is a professional advantage in mystique and obscurity - 'it wouldn't be worth much if every one could do it' line of argument. What your MBA should be about is allowing you to transcend that.

One thing though - don't forget that the workshop is only a part of the course and that many of the issues you refer to are covered in the guides, readings and books.

Anyway, thanks for your contribution to the KL workshop - great fun having you on board!

Sai Mun said...

I have no inkling of what CFA is all about...

But I do know that during/after the FANA workshop even a pure techie like me, trained as a mechanical engineer can appreciate the world of finance and valuation.

Prof Bob,
I thoroughly enjoyed with workshop.
And hope that everything that I learnt will hold up till the exam and beyond. :)

Poh said...

Hi Professor Bob, undeniable, your research based approach is very useful to real life financial analysis, do not forget CFA or most of accoutancy professional exams are distance learning programs where there are limits placed on using research based app. unless an individual has worked in accounting or investment banking line and studied at the same time, then they will appreciate and benefit greatly from the program.

Sadly, most of people study CFA just to pass the exam not to appreciate the learning process, they resort to exam techniques, read study notes by 3rd party, spot questions etc. rather than reading the recommended curriculum textbooks by CFA Institute. If one is to read the recommended textbooks, there are examples of real world companies used for accounting analysis and valuation purpose!

I agree with you that CFA exam emphases on method over judgement is problematic for individuals who care less to understand the rationales or why behind the method, they just use it sometimes blindly.For someone with strong methematical background, like you and me have no problem in deriving Dividend Discount Model, CAPM, rationales of Black-Schole Option and undertanding its limitaions, we will be able to use judgement to evaluate whether the model is suitable for the particular situation. Therefore, I would say it is an individual problem than the exam problem. Just like the FANA workshop, when you use Option Theory to value certain companies and its put-call option, it looks nice when market is normal, what if the market turn abnormal? So how many of these guy really understand and appreciate the limitations of these models if they are not really involved in the day to day captial market and test it regulary in practice?

Yes, I agree many of the analytical accounting adjustments are covered in readings, but how many of them really read and understand its implications? Most of the analysts' reports on valuation I read take accounting data as given, the most adjust the non-recurring items without really highlighting the most critical accounting issues, e.g. pension funds, revenue recognition problem, off-balance sheet liabilities..... I doubt whether they really perform their due diligent! No wonder so many professional fund managers lost money in Enron type of companies!

The above is just my personal observation and experience, anyway, I just feel that there are rooms for improvements in our FANA workshop.

Anonymous said...

Simply Fantastic!!! is all i can say with regard to FANA delivered by Prof Bob Ryan at Manchester. This was the most relevant module for me as a Finance Professional working for a leading Multinational. As a direct result of this Module, We set up the first ever Global Financial benchmarking framework for the Multinational I work for, that has greatly enriched and facilitaed Strategic decision making.
Bob Ryans book, "Corporate Finance and Valuation" is a rich source of practical knowledge as well...