《Ch 11 Equity Analysis and Valuation》.pdf

Chapter 11 - Equity Analysis And Valuation Chapter 11 Equity Analysis and Valuation REVIEW Equity analysis and valuation is the focus of this chapter. This chapter extends earlier analyses to consider earnings persistence and earning power. Earnings persistence is broadly defined and includes the stability, predictability, variability, and trend in earnings. We also consider earnings management as a determinant of persistence. Earning power refers to the ability of the core operations of a company to operate profitably. Our valuation analysis emphasizes earnings and other accounting measures for computing company value. Earnings forecasting considers earning power, estimation techniques, and monitoring mechanisms for analysis. This chapter describes several useful tools for equity analysis and valuation. We describe recasting and adjustment of financial statements. We also distinguish between recurring and nonrecurring, operating and nonoperating, and extraordinary and nonextraordinary earnings components. Throughout the chapter we emphasize the application of earnings-based analysis with several illustrations. 11-1 Chapter 11 - Equity Analysis And Valuation OUTLINE  Earnings Persistence Recasting and Adjusting Earnings Determinants of Earnings Persistence Persistent and Transitory Items in Earnings  Earnings-Based Equity Valuation Relation between Stock Prices and Accounting Data Fundamental Valuation Multiples Illustration of Earnings-Based Valuation  Earning Power and Forecasting for Valuation Earning Power Earnings Forecasting Interim Reports for Monitoring and Revising Earnings Est