Financial Statement Analysis and Valuation (Penman) FA - Download as PDF File .pdf), Text File .txt) Download as PDF, TXT or read online from Scribd The text is FINANCIAL STATEMENT ANALYSIS AND SECURITY VALUATION. Financial Statement. Analysis and. Security Valuation. Fourth Edition. Stephen H. Penman. Columbia University. McGraw-Hill. Irwin. Boston Burr Ridge, IL. Stephen H. Penman – Columbia University . The financial statements are the lens on the business. The eye on the Management Discussion and Analysis.
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[Free] Financial Statement Analysis And Security Valuation 5th Edition By Stephen Penman [PDF]. [EPUB] ronaldweinland.info is a platform for. Financial Statement Analysis & Security Valuation by Stephen H. Penman (4th Edition) Chapter 7 viewing the business through the financial statement E Financial Statement Analysis and Security Valuation Fourth Edition Stephen H. Penman Columbia University McGraw-Hill Irwin Boston Burr Ridge, IL Dubuque, .
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How does profitability tie into valuation? How does one analyze the quality of financial reports? How can the accounting trip you up? How does one deal with the accounting methods used in financial statements?
How is financial analysis developed for strategy and planning? How does one evaluate risk? For equity? For debt? How does one evaluate an equity research report? What does a good one look like? How does one trade on fundamental information?
Penman Read Penman, S.
This book also is supplementary reading for the course that can be read as the course proceeds. Other Reading The following books provide useful reference for the course. A good introduction is: Koller, T. Other books on financial statement analysis and valuation are: Page 3 of 5 Wahlen, J. White G. Palepu K. English, J. Review sessions, conducted by the course T. There will also be a hands-on session to help students develop spreadsheet models for the course project.
Course Project The course project may be done individually or in groups of up to five people. Students organize groups on their own. The project must contain only original work. It has the Columbia Business School assignment designation, A, meaning that the project is submitted by the group and each member of the group gets the same grade.
Students are best advised to develop the project as they proceed through the course. The project should involve equity analysis and in most cases is presented as an equity research report. The following are some suggestions: An equity research report on a company or set of comparison companies. Applying trading strategies based on fundamental information. Evaluation of an acquisition from the point of view of the acquiring firm or the target firm. An analysis of accounting issues in a valuation for a particular industry sector.
Evaluation of a restructuring. Evaluation of a firm's strategic choices with the goal of creating shareholder value. Discovery of mispriced firms. Evaluation of a privatization or an IPO. The submission will be graded on its creativity, demonstration of depth of knowledge, rigor, and clarity in communication. It must be original work. The latter authors offer a book, which is relatively compact while it covers con- tents in an elegant and consistent manner.
A clear advantage of Penman's textbook is its comprehensiveness and its richness in interesting practical examples. Most of them are compact case studies drawn from recent real-world problems.
This feature offers a great amount of exercises and allows lecturers to choose their collection of favorite examples for in-class discussion. Moreover, it offers plenty of training opportunities to students.
In this sense, the book offers a unique view of financial analysis. Financial statement analysis surely has many limitations. At least some of them should be noted on a textbook level. Also, putting a critical eye on valuation results is an important skill.
Penman does address these issues in the book. On page 8, for example, Penman refers to the s stock market bubble and points out examples of speculative financial analysis. As an example, he gives a critical assessment of a valuation of America Online Inc. The valuation perspective is clearly other than the one in , but Penman shows with his examples how to develop sound and critical valuation skills. This critical perspective on valuation is kept throughout the book.
Another example is the case of MCI WorldCom on page 49, which points out to the now Book reviews better known limits of financial statement analysis, which arise from potential balance sheet manipulation. The book offers an intense discussion of accruals, which are known to be particularly critical in valuation see Part I.
Considering the textbook for a class, which is taken in part by students in a finance program, I have made the experience that it is advisable to use Penman's volume for a course at an early stage where it will be more appropriate. Finance students at later stages sometimes get confused with several terms and concepts, which they were taught in finance classes as concepts are sometimes understood and used quite differently within Penman's text.
Also the question for an arbitrage opportunity due to the potential mis-valuation of a single corporation case on page sounds a little odd to those who understand the no-arbitrage concept in the sense of financial economics.
Here, it would be better to point out to portfolios of mis-valued assets and then use the notion of statistical no-arbitrage in the sense of the Arbitrage Pricing Theory APT.
This would strengthen the book's obvious perspective that real-world capital markets are inefficient. However, it remains unclear in the book what the overall investment strategy in downloading single fundamentally undervalued stocks would be and what its prospective performance could be.
To my knowledge, there is little evidence that fundamental analysis has led to consistent superior performance except for a few exceptional investors. From the teaching perspective, it is a standard question how many different textbooks should be used to accompany a course.
Penman's textbook is surely very well suited to be considered as a sole textbook source due to its richness as indicated above. Still, students sometimes feel that the text is relatively long—not only overall, but also when referring to a single subject matter—and hence ask for a more condensed outline of the subject.
Still, some readers may have the impression that fundamental principles, which are relatively few and non-technical, as well as their interaction appear less obvious due to the immense amount of other information, sometimes repetitions or other verbal discussion in the book. This matter seems to be due to a fundamental, potentially hard to manage, trade-off between com- prehensive and focused coverage of contents.
Penman's great job with the book is that—in many regards—it integrates finance theory with accounting concepts. The obvious aim of his concept is to efficiently use disclosed information for valuation purposes. Seen from the finance perspective, some readers may ask for a textbook with more content on valuation models and their critical assessment.
While any of these asset pricing models is admittedly unreliable leaving room for discussion about the appropriate required rate of return as it is stated in the text, see p. Also, it is exactly models such as the one by Fama and French, which would be the ones to close the gap between finance and accounting.
It would be helpful to find a related discussion in the text. In summary, a more integrated treatment could contain more theory and empirical findings in terms of asset pricing models and the cost of capital, thereby focusing on ways of practical model implementation.
Given results on model performance, this could finally be combined with the cutting-edge valuation applications of the present textbook. To my knowledge, there is no book to fill this gap to date.