《Financial Accounting 2th财务会计 rick Antle》ch16.pptVIP

Chapter 16 Financial Statement Analysis And The Valuation Of Common Stock Valuing a Corporation Expected present value is one widely accepted method of valuing a company. This was discussed in detail in Chapter 6. This method requires two inputs: Estimates of future cash flow Estimates of appropriate interest rates Framework for Constructing Financial Statements Projection of Cash Flows minus equals Projected Cash Flows From Operations Projected cash flows from operations is a function of: Sales projections Expense projections Working capital projections Type of Information Needed To Project Cash Flows from Operations Type of Information Needed To Project Cash Flows from Investing The information needed to project cash flows from investing is derived from a business model of how required capital investments are related to sales. Time Series Benchmarks Time Series Benchmarks - The comparison of a company against itself through time. A benchmark is a comparison point against which an item is judged. Examples of Time Series Benchmarks The following ratios serve as good benchmarks for evaluating a company over a period of time. Current Ratio Quick Ratio Debt to Equity Ratio Long-Term Debt to Equity A Liquidity Ratio Current Ratio - Measures the companies short-term ability to pay its obligations Current Ratio = Current Assets Current Liabilities A Liquidity Ratio Quick Ratio – A more conservative measure of a company’s short-term ability to pay its obligations Quick Ratio: Cash, Marketable Securities, Receivables Current Liabilities A Solvency Ratio Debt to Equity Ratio - measures the relationship of creditors’ claims to the assets to the shareholders’ claims to the assets. Total debt includes both current and long-term liabilities. Total Debt to Total Equity: Total Debt  Total Shareholders’ Equity A Solvency Ratio Long-Term Debt to E