Chapter_07 - PART II The Analysis of Financial Statements...

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The Analysis of Financial The Analysis of Financial Statements Statements PART II PART II
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The Analysis of Financial The Analysis of Financial Statements Statements 1 Knowing the Business The Products The Knowledge Base The Competition The Regulatory constraints Strategy 2 Analyzing Information In Financial Statements Outside of Financial Statements 3 Forecasting Payoffs Specifying Payoffs Forecasting Payoffs 4 Convert Forecasts to a Valuation 5 Trading on the Valuation Outside Investor: Compare Value with Price to BUY, SELL or HOLD Inside Investor: Compare Value with Cost to ACCEPT or REJECT Strategy Chapter 7 How business activities are represented in financial statements Chapter 8 How the statement of shareholders’ equity is analyzed Chapter 9 Analyzing the balance sheet and income statement to reveal profitability Chapter 10 Analyzing the cash flow statement to identify cash generation Chapter 11 Analyzing profitability to discover what drives it Chapter 12 Analyzing residual earnings growth to discover what drives it
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Chapter 7 Chapter 7 Business Activities and Business Activities and Financial Statements Financial Statements
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Business Activities and Business Activities and Financial Statements Financial Statements Chapter 1 introduced the firm’s operating, investing and financing activities. Chapter 2 introduced the financial statements. Chapters 5 and 6 outlined valuation models that anchor on those financial statements. Link to Previous Chapters This chapter shows how the three business activities are depicted in the financial statements. It also shows how the statements are redesigned to prepare the statements for applying the valuation models in Chapter 5 and 6. This Chapter Chapters 8, 9 and 10 reformulate statements according to the design developed in this chapter. Link to Next Three Chapters Link to Web Page How are the cash flows of a business identified in the cash flow statement ? How are operating and financing assets and liabilities identified in the balance sheet? How are operating and financing income identified in the income statement? What measures capture the operating and financing profitability ? to highlight these activities and Build your own analysis spreadsheet using BYOAP
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What you will learn in this What you will learn in this chapter chapter How businesses are organized to generate value for shareholders The difference between operating and financing aspects of a business How business activities are reported in financial statements How financial statements are organized to highlight operating and financing activities How business activities articulate and how financial statements articulate The four cash flows of a business and how they relate to each other Why free cash flow does not affect value added A set of accounting relations that summarize how business activities drive financial statements
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Cash Flows Between the Firm and Cash Flows Between the Firm and
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Chapter_07 - PART II The Analysis of Financial Statements...

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