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BYOAP_021706 - Financial Statement Analysis Security...

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Financial Statement Analysis and Security Valuation: Roadmap Stephen H. Penman 2003 Financial Statement Analysis & Security Valuation (Third Edition) Stephen H. Penman 2006 Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product Introduction Use the tool for: Reformulating financial statements (as in Chapters 8-10) Analyzing financial statements (as in Chapters 11-12) Forecasting and valuation (as in Chapters 13-15) Sensitivity analysis and scenario planning (as in Chapters 14, 15, and 18) Generating risk profiles (as in Chapters 18-19) This roadmap leads you through the steps to create a valuation tool. With this tool you will be able to reformulate financial statements in a spreadsheet program, analyze the financial statements using the techniques in the book, forecast pro forma financial statements, and value firms from those pro forma financial statements. In the end you will have a valuable tool to carry with you into your professional life and to use for your own personal investing. You will find that building your own analysis product is very satisfying. It will help you grasp the concepts behind the analysis, for the concepts come to life as you make them work for you in practice. And you will discover the points where your understanding is weak. Off-the-shelf spreadsheet programs that you can use at the press of a button are available but pressing buttons is dangerous if you are not sure about what is going on inside the program. Better to develop your own model, following sound principles, and so be assured of the integrity of the product. Once you have followed the roadmap here, think of adding your own bells and whistles. You can customize the tool for particular industries. You can add a quality of earnings analysis (as in Chapter 17). You can utilize spreadsheets features for scenario planning and risk analysis (as in Chapter 18). And you can add a credit analysis (as in Chapter 19).
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Financial Statement Analysis and Security Valuation: Roadmap Stephen H. Penman 2003 Financial Statement Analysis & Security Valuation (Third Edition) Stephen H. Penman 2006 Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product The roadmap: steps for building the product The steps: 1. Download financial statements 2. Reformulate financial statements Statements of shareholders' equity Income statements Balance sheets Statements of cash flows Chapter 7 gives the form of the financial statements you should work with and the accounting relations that tie the various parts of the statements together. So read this chapter before beginning. Start with reformulation of the financial statements within a spreadsheet, following the design in the book. Then carry out the financial statement analysis to identify the relevant drivers for forecasting.
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