财务报表分析Chapter11.ppt

* * * * * * * * * * * * * * * * Earnings Based Equity Valuation Valuation estimates assume dividend payments occur at the end of each year. A more realistic assumption is that, on average, these cash outflows occur midway through the year. To adjust valuation estimates for mid-year discounting, multiply the PV of future abnormal earnings by (1 + k/2). For Christy Company the adjusted valuation estimate equals $59,239. This is computed as $50,000 + (1 + [.15/2]) x $8,594. Illustration of Earnings-Based Valuation Earning Power and Forecasting for Valuation Earning power is the earnings level expected to persist into the foreseeable future Accounting-based valuation models capitalize earning power Many financial analyses directed at determining earning power Measurement of Earning Power reflects: Earnings and all its components Stability and persistence of earnings and its components Sustainable trends in earnings and its components Earning Power Earning Power and Forecasting for Valuation Factors in selecting a time horizon for measuring earning power: One-year is often too short to reliably measure earning power Many investing and financing activities are long term Better to measure earning power by using average (or cumulative) earnings over several years An extended period is less subject to distortions, irregularities, and other transitory effects Preferred time horizon in measuring earning power is typically 4 to 7 years Earning Power Earning Power and Forecasting for Valuation Adjusting Earnings per Share Earning power is measured using all earnings components. The issue is to what year we assign these items when computing earning power. Earning Power Our earnings analysis might be limited to a short time horizon. We adjust short time series of earnings for items that better relate to other periods. If this is done on a per share basis, every item must be adjusted for its tax effect using the company’s effective tax rate unless the applicable t