business analysis and valuation, text and cases - palepu

[...]... book value and ROE Financial analysis allows you to gain an in-depth understanding of what drives the firm’s current ROE The predictions from a sound business analysis are useful to a variety of parties and can be applied in various contexts The exact nature of the analysis will depend on the context The contexts that we will examine include securities analysis, credit evaluation, mergers and acquisitions,... for Business Analysis and Valuation Using Financial Statements 1-1 1 Part 1 Framework 3 Joe Smith argues that “learning how to do business analysis and valuation using financial statements is not very useful, unless you are interested in becoming a financial analyst.” Comment 4 Four steps for business analysis are discussed in the chapter (strategy analysis, accounting analysis, financial analysis, and. .. a firm’s current and prospective performance This chapter has outlined the framework for business analysis with financial statements, using the four key steps: business strategy analysis, accounting analysis, financial analysis, and prospective analysis The remaining chapters in this book describe these steps in greater detail and discuss how they can be used in a variety of business contexts DISCUSSION... Framework for Business Analysis and Valuation Using Financial Statements A Framework for Business Analysis and Valuation Using Financial Statements While the value of a firm is a function of its future cash flow performance, it is also possible to assess a firm’s value based on the firm’s current book value of equity, and its future return on equity (ROE) and growth Strategy analysis, accounting analysis, and financial... ineffective handling of an administrative situation Copyright  1998 by the President and Fellows of Harvard College Harvard Business School case 9-1 9 9-0 33 Note: All references in this case to the country of Korea mean South Korea 12 A Framework for Business Analysis and Valuation Using Financial Statements 1-1 3 Part 1 Framework Korea Stock Exchange 1998 Bank-Centered Financial System Unlike the U.S and the... professors from top business schools around the world to lead their in-house training programs Because Korea did not have many world-class business schools, the in-house business schools” of chaebols were in a unique position to develop management talent 1-1 4 Korea Stock Exchange 1998 14 A Framework for Business Analysis and Valuation Using Financial Statements Korea Stock Exchange 1998 1-1 5 Part 1 Framework... chapter S Business Analysis and 2 Valuation Tools trategy analysis is an important starting point for the analysis of financial statements Strategy analysis allows the analyst to probe the economics of the firm at a qualitative level so that the subsequent accounting and financial analysis is grounded in business reality Strategy analysis also allows the identification of the firm’s profit drivers and key... strengthened fiscal and monetary policies, far-reaching financial reforms and further liberalization of trade and capital flows, as well as improvement 8 Lee Chang-sup, “Kim rules out new currency crisis, Korea Times , September 28, 1998 1-1 6 Korea Stock Exchange 1998 16 A Framework for Business Analysis and Valuation Using Financial Statements Korea Stock Exchange 1998 1-1 7 Part 1 Framework... (competitive positioning), and (3) the way in which the firm expects to create and exploit synergies across the range of businesses in which it operates (corporate strategy) Strategy analysis, therefore, involves industry analysis, competitive strategy analysis, and corporate strategy analysis. 1 In this chapter, we will briefly discuss these three steps and use the personal computer industry and Amazon.com, respectively,... financial and insurance industries Source: Korea Fair Trade Commissions Korea Stock Exchange 1998 26 A Framework for Business Analysis and Valuation Using Financial Statements 1-2 7 Part 1 Framework EXHIBIT 3 Chronological Highlights of the Korean Economic Crisis Date Events Korea Stock Exchange 1998 August 20, 1997 The IMF approves a US$4 billion stand-by credit for Thailand, and releases . Context Credit analysis Securities analysis Mergers and acquisitions analysis Debt/Dividend analysis Corporate communication strategy analysis General business analysis Business Strategy Analysis Generate. Analysis Evaluate performance using ratios and cash flow analysis. Prospective Analysis Make forecasts and value business. ANALYSIS TOOLS 8 A Framework for Business Analysis and Valuation Using Financial. Part 1 Framework 1-9 Analysis Step 1: Business Strategy Analysis The purpose of business strategy analysis is to identify key profit drivers and business risks, and to assess the company’s