Business Analysis and Valuation Using

Financial statements are the basis for a wide range of business analysis. Managers, securities analysts, bankers and consultants all use them to make business decisions. There is strong demand among business students for course materials that provide a framework for using financial statement data in a variety of business analysis and valuation contexts.

Part 1 FRAMEWORK

A Framework for Business Analysis and Valuation Using Financial Statements

1

(1)

The Role of Financial Reporting in Capital Markets

2

(1)

From Business Activities to Financial Statements

3

(3)

From Financial Statements to Business Analysis

6

(3)

Summary

9

(1)

Discussion Questions

9

(1)

Case: The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000

10

Part 2 BUSINESS ANALYSIS AND VALUATION TOOLS

Strategy Analysis

1

(1)

Industry Analysis

1

(4)

Applying Industry Analysis: The Personal Computer Industry

5

(2)

Competitive Strategy Analysis

7

(4)

Corporate Strategy Analysis

11

(3)

Summary

14

(1)

Discussion Questions

15

(3)

Case: America Online, Inc.

18

Overview of Accounting Analysis

1

(1)

The Institutional Framework for Financial Reporting

1

(3)

Factors Influencing Accounting Quality

4

(2)

Steps in Doing Accounting Analysis

6

(5)

Accounting Analysis Pitfalls

11

(1)

Value of Accounting Data and Accounting Analysis

12

(1)

Summary

13

(1)

Discussion Questions

14

(3)

Case: Harnischfeger Corporation

17

Implementing Accounting Analysis

1

(1)

Recasting Financial Statements

1

(4)

Asset Distortions

5

(2)

Overstated Assets

7

(5)

Understated Assets

12

(9)

Liability Distortions

21

(9)

Equity Distortions

30

(3)

Summary

33

(1)

Discussion Questions

33

(8)

Appendix: Recasting Financial Statements Into Standardized Templates

41

(5)

Case: Pre-Paid Legal Services, Inc.

46

Financial Analysis

1

(1)

Ratio Analysis

1

(21)

Cash Flow Analysis

22

(5)

Summary

27

(1)

Discussion Questions

28

(2)

Appendix: Part A: Nordstrom, Inc. Financial Statements

30

(7)

Appendix: Part B: The TJX Companies, Inc. Financial Statements

37

(7)

Case: The Home Depot, Inc.

44

Prospective Analysis: Forecasting

1

(1)

Relation of Forecasting to Other Analyses

1

(1)

The Techniques of Forecasting

1

(6)

Making Forecasts

7

(3)

Sensitivity Analysis

10

(2)

Summary

12

(1)

Discussion Questions

13

(2)

Appendix: The Behavior of Components of ROE

15

(2)

Case: Krispy Kreme Doughnuts

17

Prospective Analysis: Valuation Theory and Concepts

1

(1)

Defining Value for Shareholders

2

(1)

The Discounted Abnormal Earnings Valuation Method

3

(2)

Valuation Using Price Multiples

5

(5)

Shortcut Forms of Earnings-Based Valuation

10

(2)

The Discounted Cash Flow Model

12

(2)

Comparing Valuation Methods

14

(2)

Summary

16

(1)

Discussion Questions

17

(3)

Appendix: Reconciling the Discounted Dividends and Discounted Abnormal Earnings Models

20

(1)

Case: Valuation Ratios in the Airline Industry

21

Prospective Analysis: Valuation Implementation

1

(1)

Detailed Forecasts of Performance

1

(1)

Computing a Discount Rate

2

(5)

Terminal Values

7

(4)

Computing Estimated Values

11

(5)

Summary

16

(1)

Discussion Questions

16

(3)

Case: Home Depot, Inc. in the New Millennium

19

Part 3 BUSINESS ANALYSIS AND VALUATION APPLICATIONS

Equity Security Analysis

1

(1)

Investor Objectives

1

(1)

Equity Security Analysis and Market Efficiency

2

(2)

Approaches to Fund Management and Securities Analysis

4

(2)

The Process of a Comprehensive Security Analysis

6

(4)

Performance of Security Analysts and Fund Managers

10

(2)

Summary

12

(1)

Discussion Questions

13

(4)

Case: United Parcel Service's IPO

17

Credit Analysis and Distress Prediction

1

(1)

The Market for Credit

2

(1)

The Credit Analysis Process

3

(6)

Financial Statement Analysis and Public Debt

9

(4)

Prediction of Distress and Turnaround

13

(2)

Summary

15

(1)

Discussion Questions

15

(3)

Case: Amazon.com in the Year 2000

18

Mergers and Acquisitions

1

(1)

Motivation for Merger or Acquisition

1

(4)

Acquisition Pricing

5

(5)

Acquisition Financing

10

(4)

Acquisition Outcome

14

(1)

Summary

15

(1)

Discussion Questions

16

(2)

Case: Schneider and Square D

18

Corporate Financing Policies

1

(1)

Factors That Determine Firms' Debt Policies

1

(1)

The Optimal Long-Term Mix of Debt and Equity

2

(5)

The Financing of New Projects

7

(2)

Factors That Determine Dividend Policies

9

(4)

Summary

13

(1)

Discussion Questions

14

(2)

Case: CUC International, Inc. (A)

16

Communication and Governance

1

(334)

Governance Overview

2

(2)

Management Communication with Investors

4

(2)

Communication Through Financial Reporting

6

(3)

Other Forms of Communicating with Investors

9

(3)

Auditor Analysis

12

(5)

Audit Committee Reviews

17

(1)

Summary

18

(1)

Discussion Questions

19

(4)

Case: Computer Associates International, Inc.: Governance and Investor Communication Challenge

23

Part 4 ADDITIONAL CASES

Anacomp, Inc.

1

(24)

Arch Communications Group Inc.

25

(30)

Boston Chicken, Inc.

55

(18)

Brierley Investments Limited

73

(20)

The City of New York

93

(18)

Comdisco, Inc. (A)

111

(26)

Comdisco, Inc. (B)

137

(30)

Korea Stock Exchange 1998

167

(18)

Manufactured Homes, Inc.

185

(30)

Maxwell Shoe Company, Inc.

215

(6)

The Murray Ohio Manufacturing Company

221

(24)

Oracle Systems Corporation

245

(12)

Sensormatic Electronics Corporation-1995

257

(30)

Thermo Electron Corporation

287

(18)

The Upjohn Company: The Upjohn-Pharmacia Merger

305

(30)

Index

335

(12)

Author Index

347

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Business Analysis and Valuation Using Financial Statements, Text and Cases

Summary

Table of Contents

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