Accounting and Business Valuation Methods
how to interpret IFRS accountsBy
- Malcolm Howard, Lecturer in Finance
This book is intended to appeal to junior accountants and entrepreneurs who need guidance and practical analytical tools to enable them to develop business plans, raise capital and assess risk. Readers can initiate their own business plans by copying over 200 lines of formulae that create a 5 year plan that includes an earnings statement (or profit and loss account), balance sheet and cash flow statement. It will also appeal to students taking accounting and finance modules that cover basic accounting techniques, ratio analysis, investment appraisal, as well as company valuation and share valuation. The book demonstrates with four case studies where practice often differs with theory.Chapter 1 covers basic book-keeping, showing how accounts are reconciled and controlled covering topics such as the working capital cycle and negotiating techniques. Chapter 2 deals with basic business planning and how to use ratio analysis (performance, asset management, structure, and investment ratios) to assess company performance. Chapter 3 explains that published accounts are based on a series of judgements and the effect the relatively new international financial reporting standards and legislation such as the Sarbanes-Oxley Act is having on corporate governance. Chapter 4 covers risk assessment and valuing companies. Four case studies bring everything together; how investment trusts are valued, the effect of restructuring on share prices, the difference between serious profit warnings and mere compliance with regulation and hostile takeovers. Via a thorough analysis of published accounts this book will show readers how to: distinguish between mandatory and optional reports; assess the strength of a companys balance sheet; assess the risk factors associated with investment; assess whether or not the market value of a particular company is justified.
Junior Accountants; finance & accounting students taking modules that cover basic accounting techniques such as ratio analysis.
Budding entrepreneurs who want to avoid the traps that await their fledgling businesses
Paperback, 312 Pages
Published: November 2007
Imprint: Cima Publishing
- How accurate are the accounts?; Basic principles of accounting; Accounting standards; Industry standards; The Annual Report; Responsibilities of those signing the Annual Report; Key words and limitations; The principle of judgement; What makes a director act imprudently; Clues to assess accuracy; The basic tools of analysis; Reviewing market valuations and market to book ratio; Assessing the Balance Sheet; Cash is king – funds generation; Is the company making good use of its assets; Ratio analysis (performance, asset management, structure and investor ratios); Investment appraisal procedures; Valuing companies; Systematic and unsystematic risk; Portfolio theory and diversification; The Capital Asset Pricing Model; Shortcomings of accepted economic theory; Problems associated with traditional methods of assessment – horizontal and vertical analysis; The irrationality of stock markets; ; The human factor; Income v growth; Valuation techniques for manufacturing and service companies; How to calculate the growth built into a share price; How to assess unsystematic risk; Case Studies (each point is illustrated by a particular company); Understanding the industry; Benefiting from a cautious board; A classic income share; The cost of an imprudent board; Price paid for excessive growth strategies; Biting off more than one can chew; Dramatic effect of stalled growth; Overstated assets; Profits without cash; Why it is usually better to be acquired.