Provide an introduction to analysis of the business

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-~provide an introduction to analysis of the business environment, which is a crucial part of rstanding the context in which we draw inferences from financial statements. Profitability described next as it frames much of our analysis of financial statements. In concluding the ule, we discuss the application of information garnered from financial statement analy- -- and business analysis to produce forecasts that are used in valuation. We include (in the ndix) a discussion of the regulatory environment that defines current financial reporting = companies. The remainder of the book is organized around four key steps in financial statement analy- -- and valuation. These steps are portrayed graphically at the top of the next page. Step 1 ists of Modules 1 and 2 where we develop an understanding of the business environment company-reported accounting information. This helps answer the question: What is the set- g in which the company operates? Step 2 consists of Modules 3 and 4, which introduce both _ fitability and credit risk analysis, and Modules 5 through 10, which provide tools for adjust- = and assessing financial statement information. This step is the core of financial statement ysis; allowing us to adjust financial statements as necessary to improve our analysis and er reflect business performance and financial condition. The adjustments and assessments swer the question: What is the company's current financial performance and condition? Step _ consists of Module 11, which applies our knowledge of the business environment and com- y's current status to form predictions about future financial performance and condition. - asting reflects our beliefs of where the company is heading. Step 4 consists of Modules _ through 15 and applies the forecasted information in a variety of valuation methods. The uation estimates based on forecasted numbers help answer the question: What is the corn- y worth? Implicit to all decision making in a business context should be an analysis of value the change in value. This book teaches the explicit connections that allow us to estimate pany value from financial information.
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1-5 Module 1 I Frameworkfor AnalysisandValuation Step 1-Understanding the Business Environment and Accounting Information Modules 1and 2 '"- Step 2-Adjusting and Assessing Financial Information and Accounting Information ProfitabilityAnalysis-Module 3 Investing-Modules 6,9, and 10 CreditAnalysis-Module 4 Financing-Modules 7 and 8 Operations-Module 5 , - -- Step 3-Forecasting Financial Information Module 11 - Step 4-Using Information for Valuation Cost of Capital and ValuationBasics-Module 12 Cash-Flow-BasedValuation-Module 13 Operating-Income-BasedValuation-Module 14 Market-BasedValuation-Module 15 Wheredoesthe firm operate?
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