FINANCIAL STATEMENT ANALYSIS AND SECURITY VALUATION 4/ED

Financial Statement Analysis and Security Valuation teaches students to view a firm through its financial statements and to carry out the appropriate financial statement analysis to value the firm’s debt and equity. The 4th edition works from a conceptual framework that helps the reader understand how businesses work, how they generate value and how the value they generate is captured in financial statements.

Key Features:

• This edition emphasizes the role of financial statement analysis in “negotiating with Mr. Market” over the price to pay for securities (to use the words of Benjamin Graham). Students will be able to understand how earnings forecasts relate to value, reverse engineer the market price to understand the forecast that Mr. Market is making and then challenge that forecast with sound financial statement analysis.
• With the bubble valuation of the 1990s as a backdrop, earlier editions emphasized the danger of buying overpriced shares. With multiples falling below historical benchmarks during the credit crisis of the fall of 2008, this edition applies the same analysis to evaluating underpricing.
• Each text part is a distinct module, allowing the parts to be taught out of order without inconveniencing the instructor.

Table of Contents:

Introduction to Investing and Valuation

Introduction to the Financial Statements

Part One: Financial Statements and Valuation

• How Financial Statements Are Used in Valuation
• Cash Accounting, Accrual Accounting and Discounted Cash Flow Valuation
• Accrual Accounting and Valuation: Pricing Book Values
• Accrual Accounting and Valuation: Pricing Earnings

Part Two: The Analysis of Financial Statements

• Viewing the Business Through the Financial Statements
• The Analysis of the Statement of Shareholders’ Equity
• The Analysis of the Balance Sheet and Income Statement
• The Analysis of the Cash Flow Statement
• The Analysis of Profitability
• The Analysis of Growth and Sustainable Earnings

Part Three: Forecasting and Valuation Analysis

• The Value of Operations and the Evaluation of Enterprise Price-to-Book Ratios and Price-Earnings Ratios
• Anchoring on the Financial Statements: Simple Forecasting and Simple Valuation
• Full-Information Forecasting, Valuation and Business Strategy Analysis

Part Four: Accounting Analysis and Valuation

• Creating Accounting Value and Economic Value
• Analysis of the Quality of Financial Statements

Part Five: The Analysis of Risk and Return

• The Analysis of Equity Risk and Return
• The Analysis of Credit Risk and Return

Appendix A: Summary of Formulas

Index

About the Author

Stephen H. Penman, Columbia University.