Quality of earnings questions arise when firms that practice conservative accounting change the level of their investment in net operating assets: increases in net operating assets create quot;hidden reserves,quot; depressing earnings, and decreases in investment release hidden reserves into...

This paper outlines a financial statement analysis for use in equity valuation. Standard profitability analysis is incorporated, and extended, and is complemented with an analysis of growth. The perspective is one of forecasting payoffs to equities. So financial statement analysis is presented...

It is common to apply multipliers to earnings and book value to calculate approximate equity values. However, applying a price-earnings multiple or a price-to-book multiple typically produces two valuations and the analyst is left with the question of how to combine these into one valuation....

This paper lays out alternative equity valuation models that involve forecasting for finite periods and shows how they are related to each other. It contrasts dividend discounting models, discounted cash flow modes, and quot;residual incomequot; models based on accrual accounting. It shows that...

Valuation models are useful tools, but they need to be handled with care. When taking the form of mathematical formulas, they can easily be made to convey a false sense of precision. In particular, selective choice of long-term growth rates and discount rates can be used to justify almost any...