THE INVESTMENT SETTING
Answers to Questions
When an individuals current money income exceeds his current consumption desires, he saves the
excess. Rather than keep these savings in his possession, the individual may consider it worthwhile
Valuation: MarketBased Approach
An analytical tool
A valuation tool
Market multiples are shortcut valuation tools.
They use just one or two accounting numbers.
They are relatively simple ratios of Marke
Role of Earnings
Primary measure of firm performance
under accrual accounting system and
hence, provide a basis for valuation.
Has a direct impact on the capital markets
and the pricing of shares.
Used for in
Valuation: Cash FlowBased Approaches
Valuing the Firm
Economic theory teaches us that the value of an
Projected Future Payoffst
Expected future payoffs can be measured in
1. How will the forecasts in Table 8-2 change if TJX maintains a sales growth rate of
10 percent per year from 2011 to 2020 (and all the other assumptions are kept
2. Recalculate the forecasts in Table 8-2, assuming that the
CH. 1 Discussion Questions #2-4
2. Accounting statements rarely report financial performance without error. List
three types of errors that can arise in financial reporting.
a) Audit error third party auditing reduce the quality of financial reporting
Ch. 3AND Ch. 4
#4. Accounts receivable turnover ratio can be used to distinguish which company ship evenly
throughout the quarter and the other ship goods at the end of the quarter. Companies can use
account receivable turnover ratios to determi
1. Financial analysts typically measure financial leverage as the ratio of debt to
equity. However, there is less agreement on how to measure debt, or even equity.
How would you treat the following items in computing this ratio? Justify your
1. What of the following types of firms do you expect to have particularly high or low
asset turnover? Explain why.
-A supermarket: high asset turnover. Food products are perishable causing high
-A pharmaceutical company: Hig
P A R T
WEB CHAPTER 19
Analysis of Financial Statements
WEB CHAPTER 20
An Introduction to Security Valuation
Early in the textbook, you learned
about the purpose of investing,
the importance of appropriate
BUS 170 Section 001
Financial Statement Valuation
Instructor: Dr. Richard (Dick) S. Savich, CPA Quarter: Spring 2016
Office: Anderson Hall 133
Lecture time: 9:40 11:00 AM MW
Phone: (951) 827-6448
Classroom: Olmsted 1212
Cell: (760) 238-3900