Financial Reporting Financial Statement Analysis And Valuation 8th Edition

Financial Reporting Financial Statement Analysis And Valuation 8th Edition – Economic characteristics and competitive dynamics influence the strategies that companies use. When analyzing and forecasting financial statements, the analyst must take into account economic characteristics and competitive dynamics. Chapter: 01

Horizontal competition Competition between existing firms Threat of new entrants Threat of substitute firms Vertical buyer competition Power of supplier Chapter: 01

Financial Reporting Financial Statement Analysis And Valuation 8th Edition

Often the first order of the competition. Industries are characterized by: Concentrated competition. Widespread competition. The higher the industry concentration, the less competition there is between existing competitors and therefore the more profitable the firms. Chapter: 01

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Are there barriers to entry? Do existing competitors have specific competitive advantages that make it difficult for other companies to enter and compete? If this is the case, firms in the industry are likely to make higher profits than if new entrants could easily enter the market. Chapter: 01

10 Threat of Substitutes How likely are customers to switch to substitute products or services? How likely are they to change? With close substitutes, competition increases and profitability decreases. Unique products with fewer substitutes increase profitability. Chapter: 01

11 Buyer power refers to the relative number of buyers and sellers in an industry and the leverage that buyers have over price. It refers to the price sensitivity of buyers and the elasticity of demand. Are buyers price takers or price takers? Chapter: 01

12 Supplier power refers to the bargaining leverage over input prices from suppliers. If an industry has a large number of potential buyers of materials produced by relatively few suppliers, the suppliers have more power to set prices and make profits. Chapter: 01

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Is demand growing rapidly or is the industry relatively mature? Does demand move with business cycles or is it insensitive? Does demand vary seasonally or is it relatively stable throughout the year? Chapter: 01

Are there high barriers to entry? Are there high barriers to exit, such as environmental cleanup costs? Chapter: 01

16 Production Is the production process capital intensive or labor intensive or a combination of the two? Is the manufacturing process complex with low error tolerance or relatively simple with a product range of acceptable quality? Chapter: 01

17 Marketing Is the product promoted to other businesses or sold directly to consumers? Does constant demand pull products through distribution channels, or must companies continually create demand? Chapter: 01

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Are the assets of companies in the industry relatively short-term or long-term? Are the assets of companies in the industry relatively low risk or high risk? Is the industry relatively profitable and mature enough to generate sufficient cash flow, or is it fast-growing and in need of external financing? Chapter: 01

Strategy Analysis Framework Product or Service Value Chain Characterization Integration Geographic Diversification Industry Diversification Chapter 01

Product or Service Feature Product Differentiation Strategy Unique Products Earning Relatively High Profits Low Cost Leadership Strategy Undifferentiated Products Accepting Lower Margins in Exchange for Greater Sales Volume and Market Share Chapter: 01

Manufacturing integration in the value chain: Does the company perform all manufacturing operations in-house or outsource all manufacturing or component manufacturing but perform assembly operations in-house? Distribution: Does the company retain control of the distribution function or outsource it? Chapter: 01

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Geographic Diversification Does the company focus its products on the domestic market or integrate horizontally into many countries? Industry Diversification Does the company operate in one industry or diversify into several industries? Chapter: 01

Income Statement Statement of Cash Flow Statement of Stockholders’ Equity Statement of Comprehensive Income The first four statements are required; most companies include all five. Chapter: 01

GAAP defines the valuation and measurement techniques used in the preparation of financial statements. The SEC has the statutory authority to determine the accounting principles acceptable in the United States, but has delegated that authority to the FASB Chapter: 01

Balance sheet or statement of financial position. Assets = Liabilities + Equity The assets portion of the balance sheet reports the impact of a company’s operating and investment decisions. The liabilities and equity section of the balance sheet report liabilities arising from the company’s operating decisions and financing decisions. Chapter: 01

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Assets A firm can only recognize as assets those resources: for which it has the right to future economic benefits as a result of past transactions or events. so that the company can predict and measure future profits with a degree of accuracy and reliability. In current assets, investments, real estate, plant and equipment and intangible assets are classified. Chapter: 01

Commitments reflect managers’ expectations of sacrificing future resources to meet current obligations. Divided into groups: Current Liabilities: Includes liabilities that the company expects within a year. Long-term liabilities: includes long-term liabilities, other liabilities and deferred income taxes. Chapter: 01

Stock companies residual interest or debt. Includes: Funds initially contributed by shareholders for the benefit of the company. Accumulated net income from dividends declared. Equity affects the recognition or valuation of certain assets or liabilities. Treasury shares. Chapter: 01

The analyst recognizes: A company’s resources that generate future cash flows are only considered assets if they were purchased from another company and have a measurable purchase price. Non-monetary assets are measured at cost, less accumulated depreciation or amortization. Chapter: 01

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The analyst recognizes: (continued) Rights to use resources and obligations for future payments may appear as assets and liabilities. Contingent liabilities are stated at the present value of expected cash flows at the interest rate charged when the liability is incurred. Chapter: 01

Income Statement – A measure of operating performance that provides information about a company’s profitability over a period of time. Under accrual accounting, revenue is recognized when: All (or substantially all) of the revenue-generating process is completed by delivering products or services to customers. It is reasonably certain that it has satisfied an obligation or produced an asset that can be measured reliably. Chapter: 01

The cash flow statement evaluates a company’s past ability to generate cash flow and predicts future free cash flow. Categories: Operating Investments Financing operations that are not directly related to cash are shown either in a supplementary chart or in a note on the cash flow statement. Chapter: 01

Tools: Total Size Financial Statements Percent Change Financial Statements Financial Statements Profitability: EPS, ROCE, etc.

Solutions Manual For Financial Reporting Financial Statement Analysis And Valuation 8th Edition By W By Husky111

Forecasts are the source of valuation models and the quality of decisions is based on the reliability of forecasts. Forward-looking financial statements are based on the analyst’s assumptions about the future. Estimated amounts in financial statements serve as the basis for valuation models. Chapter: 01

Advantages: Stock prices react to published information about the company with a high degree of efficiency. One of the conclusions of highly efficient capital markets is that analysts and investors have a harder time finding undervalued or overvalued stocks. Chapter: 01

Conducting a financial analysis that relies on analysis, forecasting and evaluation of key accounting measures can be very beneficial. In order to understand the relationship between accounting income and equity income and to predict the potential of generating excess income through analysis and forecasting, the results of empirical research by D. Consider Craig Nichols and James Wallen. Chapter: 01

Annual Report to Shareholders Annual Report Form 10-K Annual Report Form 10-K Quarterly Report Prospectus or Registration Statement Chapter 01

Pdf) Analysis Of Financial Statements

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