financial-statement-data-in-assessing-the-future-potential-of-a-technology-firm-the-case-of-nokia_2006_international-review-of-financial-analysis文档.pdfVIP

International Review of Financial Analysis 15 (2006) 256– 286 Financial statement data in assessing the future potential of a technology firm: The case of Nokia Erkki K. Laitinen * Department of Accounting and Business Finance, University of Vaasa, POB 700, FIN-65101 Vaasa, Finland Received 31 March 2004; accepted 3 March 2005 Available online 9 November 2005 Abstract The paper introduces a financial statement method to assess the future potential of a firm. First, the last strategic steady phase is identified. Second, growth rate for total expenditure is estimated (growth process ). Third, the revenue generating potential of total expenditure is evaluated by a distributed lag function (revenue-generating process). This function is used to recalculate expenses and assets using alternative depreciation theories. Third, financial behavior is modeled by analyzing financial assets, taxation, interest expenses and revenues, and dividends (financial process ). Fourth, these processes are used to assess the future potential. The method is illustrated by the case of Nokia for the period 1990–2000. D 2005 Elsevier Inc. All rights reserved. JEL classification: M Business administration and business economics marketing; Accounting; M4 Accounting; M41 Accounting Keywords: Future potential; Technology firm; Financial statement analysis; Long-term analysis; Time series analysis; Nokia 1. Introduction There are forces that fundamentally reshape the economic and business world in a way that diminishes the value of financial information in assessing the future potential of business firms in general (see Johanson, Martenson, Skoog, 2001). Nowadays, the only sustainable competitive advantage that can be truly achieved is based on intang