Chapter_01 - Chapter 1 Chapter Introduction To Investing and Valuation The Aim of the Course The To develop and apply technologies for valuing

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Chapter 1 Chapter 1 Introduction Introduction To To Investing and Valuation Investing and Valuation
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The Aim of the Course The Aim of the Course To develop and apply technologies for valuing firms and for planning to generate value within the firm Features of the approach: A disciplined approach to valuation: minimizes ad hockery Builds from first principles Marries fundamental analysis and financial statement analysis Stresses the development of technologies that can be used in practice: how can the analyst gain an edge? Compares different technologies on a cost/benefit criterion Adopts activist point of view to investing: the market may be inefficient Integrates financial statement analysis with corporate finance Exploits accounting as a system for measuring value added Exposes good (and bad) accounting from a valuation perspective
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What Will You Learn from the Course What Will You Learn from the Course How intrinsic values are calculated What determines a firm’s value How financial analysis is developed for strategy and planning The role of financial statements in determining firms’ values How to pull apart the financial statements to get at the relevant information How ratio analysis aids in valuation How growth is analyzed and valued The relevance of cash flow and accrual accounting information How to calculate what the P/E ratio should be How to calculate what the price-to-book ratio should be How to do business forecasting How to assess the quality of the accounting
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Links Links Who invests in firms and what analysis do they need? How is fundamental investing different from other investment styles? What is the role of the professional analyst? How are business analysis and fundamental analysis connected? This Chapter introduces investing and shows how fundamental analysis helps investors to choose investments. This Chapter Chapter 2 introduces the financial statements that are used in financial analysis Link to Next Chapter Go to the book’s web site at: http://www.mhhe.com/ penman3e. It explains how to find your way around the site and how to find your way to financial information. Link to Web Page
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Investment Styles Investment Styles Intuitive investing Rely on intuition and hunches: no analysis Passive investing Accept market price as value: no analysis Fundamental investing: challenge market prices -Active investing -Defensive investing
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Costs of Each Approach Costs of Each Approach Danger in intuitive approach: Self deception; ignores ability to check intuition Danger in passive approach: Price is what you pay, value is what you get: The risk of paying too much Fundamental analysis Requires work ! Prudence requires analysis: a defense against paying the
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This note was uploaded on 10/07/2010 for the course ECTCS ec12947322 taught by Professor Johnathayeri during the Spring '10 term at Life.

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Chapter_01 - Chapter 1 Chapter Introduction To Investing and Valuation The Aim of the Course The To develop and apply technologies for valuing

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