Business Analysis and Valuation teaches students how to use financial statement information to assess a firm's financial performance, value, and creditworthiness. This new IFRS edition has been adapted and developed by Erik Peek of Maastricht University. The text is primarily aimed at Masters and upper-level undergraduate programs in business and builds a bridge between accounting and finance, therefore making it accessible to both finance and accounting students. The distinctive strengths of this text include a large number of real-world cases used to illustrate theory; the step-by-step analysis methodology, and the extensive discussion of strategy analysis. The presentation of material is based on business analysis before financial analysis, which ensures that financial analysis is approached in a real-world manner and is driven by strategy. The pedagogy is geared toward helping students to develop strong practical skills using current applications. The most popular Harvard cases from the third edition have been retained in this IFRS edition and new cases written by Erik Peek added to give a new exciting European dimension to the text.
Table of Contents
Part I FRAMEWORK 1 A Framework for Business Analysis and Valuation Using Financial Statements The Role of Financial Reporting in Capital Markets From Business Activities to Financial Statements From Financial Statements to Business Analysis Public Versus Private Corporations Summary Discussion Questions Notes Appendix: Defining Europe CASE: The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000 Part 2 BUSINESS ANALYSIS AND VALUATION TOOLS 2 Strategy Analysis Industry Analysis Applying Industry Analysis: The European Airline Industry Competitive Strategy Analysis Corporate Strategy Analysis Summary Discussion Questions Notes CASE: America Online, Inc. 3 Overview of Accounting Analysis The Institutional Framework for Financial Reporting Factors Influencing Accounting Quality Steps in Doing Accounting Analysis Accounting Analysis Pitfalls Value of Accounting Data and Accounting Analysis Summary Discussion Questions Notes CASE: Land Securities Group (A): Choosing Cost or Fair Value on Adoption of IFRS 4 Implementing Accounting Analysis Recasting Financial Statements First-Time Adoption of IFRS Recognition of Assets Asset Distortions Recognition of Liabilities Liability Distortions Equity Distortions Summary Discussion Questions Notes Appendix: Recasting Financial Statements into Standardized Templates CASE: First-Time Adoption of IFRS 5 Financial Analysis Ratio Analysis Cash Flow Analysis Summary Discussion Questions Notes Appendix: Part A- Volkswagen AG Financial Statements Appendix: Part B- DR.ING. H.C.F. Porsche AG Financial Statements CASE: Carrefour S.A. 6 Prospective Analysis: Forecasting Relation of Forecasting to Other Analyses The Techniques of Forecasting Making Forecasts Sensitivity Analysis Summary Discussion Questions Notes Appendix: The Behavior of Components of ROE CASE: Forecasting Earnings and Earnings Growth in the Oil and Gas Industry 7 Prospective Analysis: Valuation Theory and Concepts Defining Value for Shareholders The Discounted Abnormal Earnings Valuation Method The Discounted Abnormal Earnings Growth Valuation Method Valuation Using Price Multiples Shortcut Forms of Earnings-Based Valuation The Discounted Cash Flow Model Comparing Valuation Methods Summary Discussion Questions Notes Appendix: Reconciling the Discounted Dividends, Discounted Abnormal Earnings Models and discounted abnormal earnings growth models CASE: Puma AG 8 Prospective Analysis: Valuation Implementation Detailed Forecasts of Performance Computing a Discount Rate Terminal Values Computing Estimated Values Summary Discussion Questions Notes CASE: Ryanair Holdings Plc Part 3 BUSINESS ANALYSIS AND VALUATION APPLICATIONS 9 Equity Security Analysis Investor Objectives Equity Security Analysis and Market Efficiency Approaches to Fund Management and Securities Analysis The Process of a Comprehensive Security Analysis Performance of Security Analysts and Fund Managers Summary Discussion Questions Notes CASE: The Initial Public Offering of Part Gaming Plc 10 Credit Analysis and Distress Prediction The Market for Credit The Credit Analysis Process Financial Statement Analysis and Public Debt Prediction of Distress and Turnaround Summary Discussion Questions Notes CASE: Estimating Debt Ratings 11 Mergers and Acquisitions Motivation for Merger or Acquisition Acquisition Pricing Acquisition Financing Acquisition Outcome Summary Discussion Questions Notes CASE: The KLM ? Air France Merger 12 Corporate Financing Policies Factors That Determine Firms? Debt Policies The Optimal Long-Term Mix of Debt and Equity The Financing of New Projects Factors That Determine Dividend Policies Summary Discussion Questions Notes CASE: CUC International, Inc. 13 Communication and Governance Governance Overview Management Communication with Investors Communication Through Financial Reporting Other Forms of Communicating with Investors Auditor Analysis Audit Committee Reviews Summary Discussion Questions Notes CASE: Investor Relations at TOTAL Index Author Index