Cover image for Step-by-step business analysis and valuation : using financial statements to value any business
Step-by-step business analysis and valuation : using financial statements to value any business
Palepu, Krishna G., 1954-
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Publication Information:
Cincinnati, Ohio : South-Western ; London : International Thomson, [1996]

Physical Description:
208 pages ; 24 cm
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HF5681.V3 P3 1996 Adult Non-Fiction Popular Materials-Small Business

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Here, in a new step-by-step contemporary framework, is a comprehensive way to analyze business strategy, assess accounting policies & estimates, evaluate financial performance, & forecast the firm's value. A variety of real-world decision contexts helps the reader understand how the framework actually works in the areas of securities analysis, credit analysis, merger & acquisition analysis, corporate financing policies analysis, & management communication analysis.

Author Notes

Krishna G. Palepu is one of today's most recognized and respected authorities in finance. He is the Thomas J. Casserly Jr. Professor of Business Administration at Harvard University. He holds both Masters and Ph.D. degrees and has taught finance courses at Harvard Business School since 1983. He is the Associate Editor of several leading research journals including the Journal of Accounting and Economics and Accounting Review. Professor Palepu also consults extensively and is on the board of advisors to a variety of organizations.
Vic L. Bernard was a CPA and held a Ph.D. from the University of Illinois. He was the Director of the Paton Accounting Center at the University of Michigan and Director of Research for the American Accounting Association.
Paul M. Healy is similarly distinguished. He holds the Nanyang Technological University Chair in Management at MIT. He has taught financial accounting and financial statement analysis at MIT since 1983. He has received numerous awards throughout his career and his work has been published in numerous journals.

Table of Contents

Part 1 Introduction
1 A Framework for Doing Business Analysis Using Financial Statementsp. 1
From Business Activities to Financial Statementsp. 2
From Financial Statements to Business Analysisp. 6
Summary and Conclusionsp. 8
Part 2 Business Analysis Tools
2 Business Strategy Analysisp. 1
Industry Analysisp. 1
Degree of Actual and Potential Competitionp. 3
Relative Bargaining Power in Input and Output Marketsp. 5
Applying Industry Analysis: The Computer Industryp. 7
Competitive Strategy Analysisp. 9
Sources of Competitive Advantagep. 9
Achieving and Sustaining Competitive Advantagep. 11
Applying Business Strategy Analysisp. 11
Summary and Conclusionsp. 12
Notesp. 13
3 Accounting Analysisp. 1
Overview of the Institutional Framework for Financial Reportingp. 1
Doing Accounting Analysisp. 7
Accounting Analysis Pitfallsp. 13
Application of Accounting Analysis Concepts to Compaq Computer Corporationp. 13
Summary and Conclusionsp. 16
Notesp. 16
4 Financial Analysisp. 1
Ratio Analysisp. 1
Cash Flow Analysisp. 18
Summary and Conclusionsp. 24
Notesp. 25
5 Prospective Analysis: Forecastingp. 1
Relation of Forecasting to Other Analysesp. 1
The Techniques of Forecastingp. 2
Seasonality and Interim Forecastsp. 19
Summary and Conclusionsp. 19
Notesp. 20
6 Prospective Analysis: Valuation Based on Discounted Cash Flowsp. 1
Overview of Discounted Cash Flow (DCF) Analysisp. 2
Step 1 of DCF: Forecast Free Cash Flowsp. 3
Step 2 of DCF: Forecast Cash Flows Beyond the "Terminal Year"p. 5
Step 3 of DCF: Discount Expected Free Cash Flowsp. 12
Step 4 of DCF: Calculate the Value of Equityp. 17
Summary and Conclusionsp. 20
Appendixp. 20
Notesp. 21
7 Prospective Analysis: Accounting-Based Valuation Techniquesp. 1
Valuation Based on Discounted Abnormal Earningsp. 1
Techniques of Valuation Based on Price Multiplesp. 9
Detailed Valuation Versus Use of Multiplesp. 15
Summary and Conclusionsp. 16
Notesp. 16
Part 3 Business Analysis Applications
8 Equity Security Analysisp. 1
Approaches to Security Analysisp. 4
The Process of a Comprehensive Security Analysisp. 6
Financial Statement Data and Security Pricesp. 10
Summary and Conclusionsp. 14
Notesp. 15
9 Credit Analysis and Distress Predictionp. 1
The Market for Creditp. 2
The Credit Analysis Processp. 4
Financial Statement Analysis and Public Debtp. 11
Prediction of Distress and Turnaroundp. 16
Summary and Conclusionsp. 17
Notesp. 18
10 Mergers and Acquisitionsp. 1
Motivation for Merger or Acquisitionp. 2
Acquisition Pricingp. 5
Acquisition Financingp. 11
Acquisition Outcomep. 15
Summary and Conclusionsp. 17
Notesp. 18
11 Corporate Financing Policiesp. 1
The Optimal Long-Term Mix of Debt and Equityp. 2
The Financing of New Projectsp. 9
Summary and Conclusionsp. 16
Notesp. 17
12 Management Communicationsp. 1
Communicating with Investorsp. 2
Communicating Through Financial Reportingp. 4
Other Forms of Communicating with Investorsp. 8
Summary and Conclusionsp. 11
Notep. 12
Part 4 Compaq Computer Corporation