Valuation : theories and concepts

Valuation theories and concepts

Valuation: Theories and Concepts provides an understanding on how to value companies that employ non-standard accounting procedures, particularly companies in emerging markets and those that require a wider variety of options than standard texts provide. The book offers a broader, more holistic per...

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Detalles Bibliográficos
Otros Autores: Kumar, Rajesh, author (author)
Formato: Libro electrónico
Idioma:Inglés
Publicado: London : Elsevier [2016]
Edición:1st edition
Materias:
Corporations > Valuation.
Ver en Biblioteca Universitat Ramon Llull:https://discovery.url.edu/permalink/34CSUC_URL/1im36ta/alma991009630031806719
Tabla de Contenidos:
  • Front Cover
  • Valuation
  • Copyright Page
  • Dedication
  • Contents
  • Preface
  • Acknowledgments
  • I. Theories and Concepts
  • 1 Perspectives on value and valuation
  • 1.1 Introduction
  • 1.2 Application of valuation
  • 1.3 Approaches to valuation
  • 1.4 Steps in value creation
  • 1.5 Value drivers
  • 1.6 Empirical evidence on value drivers
  • 1.7 Strategic models of valuation
  • 1.8 Stock price maximization
  • 1.8.1 Shareholder value and wealth creation
  • 1.8.2 Value drivers for shareholder wealth creation
  • 1.8.3 Measures of shareholder value creation
  • 1.8.3.1 Economic value
  • 1.8.3.2 Equity spread
  • 1.8.3.3 Implied value
  • 1.8.3.4 Cash flow return on investment (CFROI)
  • 1.8.4 Measures of shareholder wealth creation
  • 1.8.5 Hybrid wealth creation measure
  • 1.8.5.1 Market value added (MVA)
  • 1.9 Linkage between strategic management and shareholder value
  • 1.9.1 Value-based management
  • 1.9.2 Significance of shared value
  • 1.9.3 Intangibles
  • 1.9.4 Valuation of intangibles
  • 1.9.4.1 Market approach
  • 1.9.4.2 Cost approach
  • 1.9.4.3 Income method
  • 1.9.4.4 Calculated intangible value (CIV)
  • 1.9.5 Brand value
  • 1.9.6 Brand valuation
  • 1.10 Challenges in valuing intangibles
  • 1.11 Innovation and value creation
  • 1.12 Review of research studies on usage of valuation methods
  • 1.13 Challenges for valuation
  • 1.14 Review on theories of valuation
  • 1.15 Most valuable companies
  • Appendix: Financial statement analysis
  • Sources and uses of cash
  • Cash flow identity
  • Measures of cash flow
  • Common size statements
  • Common base year statements
  • Ratio analysis
  • Short-term solvency or liquidity measures
  • Current ratio
  • Quick or acid test ratio
  • Absolute liquid or cash ratio
  • Profitability measures
  • Net profit margin
  • Return on assets (ROA)
  • Return on capital employed (ROCE)
  • Return on equity (ROE).
  • Long-term solvency measures
  • Earnings and cash flow coverage ratios
  • Interest coverage ratio
  • Cash coverage ratio
  • Operational efficiency or asset utilization ratios
  • Inventory turnover ratio
  • Receivables turnover ratio
  • Market value measures
  • Du Pont system
  • Business risk
  • Analysis of growth potential
  • Analysis of bank performance
  • Profitability measures
  • Efficiency measures
  • Expense measures
  • Leverage ratios
  • Asset quality
  • Management quality
  • Limitations of ratio analysis
  • Links for websites for financial analysis
  • Fundamentals of valuation
  • Time value of money
  • Future value and compounding
  • Present value and discounting
  • Discounted cash flow valuation
  • Annuities
  • Perpetuities
  • Growing annuity
  • Continuous compounding
  • Different types of interest rates
  • Nominal or stated interest rate
  • Annual percentage rate
  • Periodic rate
  • Effective annual rate
  • Different types of loans
  • Pure discount loans
  • Interest only loans
  • Amortized loans
  • Bond valuation and interest rates
  • Basics of bonds
  • Features of bond
  • Indenture
  • Bond terminology
  • Par value
  • Coupon and coupon rate
  • Maturity date
  • Yield to maturity (YTM)
  • Current yield
  • Yield to call
  • Premium and discount bond
  • Value of bond
  • Interest rates
  • Term structure of interest rates
  • Bond ratings
  • Bond pricing theorems
  • Duration theorems
  • Basics of stock valuation
  • Summary highlights of stock valuation
  • General method
  • Constant growth method
  • Nonconstant growth
  • Two stage growth
  • References
  • 2 Risk and return
  • 2.1 Introduction
  • 2.2 Accounting and risk measures
  • 2.3 Measures of returns
  • 2.3.1 Total return
  • 2.3.2 Historical rates of return
  • 2.3.3 Average returns
  • 2.3.4 Expected return
  • 2.3.5 Portfolio returns
  • 2.3.6 Determinants of rate of return
  • 2.4 Risk premium.
  • 2.4.1 Classification of risks
  • 2.4.2 Diversification
  • 2.4.3 Risk measures
  • 2.4.3.1 Variance and standard deviation
  • 2.4.3.2 Coefficient of variation
  • 2.4.4 Portfolio risk
  • 2.4.5 Sharpe ratio
  • 2.4.5.1 Beta as a measure of systematic risk
  • 2.4.5.2 Beta estimation
  • 2.5 Models of risk and return
  • 2.5.1 Mean-variance optimization and modern portfolio theory
  • 2.5.2 Capital market theory
  • 2.5.3 Capital asset pricing model
  • 2.5.3.1 Arbitrage
  • 2.5.4 Arbitrage pricing theory
  • 2.5.5 Multifactor models
  • 2.5.6 Fama French three factor model
  • 2.5.7 Review of empirical research on models of risk and return
  • 2.5.8 Bond ratings
  • 2.5.9 Determinants of bond ratings
  • References
  • 3 Efficient capital markets and its implications
  • 3.1 Introduction
  • 3.2 Forms of efficient market hypothesis
  • 3.2.1 Weak form of efficient market
  • 3.2.2 Semi-strong form of efficient market
  • 3.2.3 Strong form of efficient market
  • 3.3 Tests of EMH
  • 3.3.1 Tests for weak form of EMH
  • 3.3.2 Tests for semi-strong form of EMH
  • 3.3.2.1 Event study
  • 3.3.2.1.1 Announcement effects on stock splits
  • 3.3.2.1.2 Announcement effects on mergers and acquisitions
  • 3.3.2.1.3 Announcement effect on initial public offerings
  • 3.3.2.1.4 Announcement effects on economic events
  • 3.3.2.1.5 Dividend announcements
  • 3.3.2.2 Event study methodology
  • 3.3.2.2.1 Market model method
  • 3.3.2.2.2 The market-adjusted return method
  • 3.3.3 Tests of strong form EMH
  • 3.4 Review of research studies on market efficiency
  • 3.5 Anomalies of EMH
  • 3.6 Implications of EMH
  • 3.7 Behavioral finance
  • References
  • 4 Estimation of cost of capital
  • 4.1 Introduction
  • 4.1.1 Risk-free rate
  • 4.1.2 Risk premium
  • 4.1.2.1 Estimation of ERP
  • 4.1.2.2 Other perspectives on estimation of market risk premium
  • 4.1.2.2.1 Unconditional MRP.
  • 4.1.2.2.2 Conditional MRP
  • 4.1.2.3 Research discussions on ERP
  • 4.1.2.4 Variations in risk premium estimations
  • 4.1.2.5 Risk premiums in other markets
  • 4.1.2.5.1 Estimation of country risk premium from default spread
  • 4.1.2.5.2 Country risk premium from volatility of stock prices
  • 4.1.2.5.3 Estimation of default spread from bonds
  • 4.1.3 Estimation of cost of equity
  • 4.1.4 Beta estimation
  • 4.1.4.1 Historical beta estimation
  • 4.1.4.1.1 Regression beta calculation
  • 4.1.4.2 Fundamental beta estimation
  • 4.1.4.2.1 Fundamental beta
  • 4.1.4.2.2 Determinants of beta
  • 4.1.4.2.3 Bottom-up approach for beta estimation
  • 4.1.4.2.4 Steps in bottom-up beta estimation
  • 4.1.4.3 Accounting betas
  • 4.1.5 Cost of equity
  • 4.1.6 Cost of capital
  • 4.1.6.1 Cost of debt calculation
  • 4.1.6.2 Cost of preferred stocks
  • 4.1.6.2.1 Estimation of Weighted Average Cost of Capital (WACC)
  • 4.1.6.2.2 Estimation of values of capital components
  • 4.1.6.2.3 Estimations of components of debt capital
  • 4.1.7 Estimation of cost of capital-industry practices
  • 4.1.8 Estimation of WACC-Johnson &amp
  • Johnson
  • 4.1.8.1 Estimation of cost of capital of Chevron corporation
  • References
  • 5 Principles of cash flow estimation
  • 5.1 Introduction
  • 5.2 Adjustments to financial statements
  • 5.2.1 Invested capital
  • 5.2.2 Debt
  • 5.2.3 Equity
  • 5.2.4 Return on Invested Capital
  • 5.2.5 Free cash flow
  • 5.2.6 Operating working capital
  • 5.2.7 Net capital expenditure
  • 5.2.8 Provisions and reserves
  • 5.2.9 Earnings adjustments
  • 5.3 Adjustments of expensed investments
  • 5.3.1 Adjustment for financing expenses: case of operating leases
  • 5.3.2 Adjustment for operating lease: case of IBM in 2013
  • 5.3.3 Summary of adjustments for operating income
  • 5.4 Reflections on managed earnings
  • 5.4.1 Tax effect on valuation.
  • 5.5 Estimating reinvestment needs for valuation
  • 5.5.1 Net capital expenditures
  • 5.5.2 Working capital investments
  • 5.5.3 Estimation of net capital expenditure for China National Petroleum Corporation
  • 5.6 Forecasting growth
  • 5.6.1 Revenue forecast models
  • 5.6.2 Forecast of income statement items
  • 5.6.3 Forecast of balance sheet items
  • 5.6.3.1 Estimation of historical growth rates to forecast future growth
  • 5.6.3.2 Analysts estimation of growth rates
  • 5.6.3.3 Estimation of growth rate through fundamentals
  • 5.6.3.3.1 Estimation of growth rate of EPS: Apple Inc
  • 5.6.3.3.2 The growth rate in EPS can also be estimated through fundamentals
  • 5.6.3.3.3 Estimation of growth rate of net Income: Apple Inc
  • 5.6.3.3.4 Estimation of expected growth rate of net income: Apple Inc
  • 5.6.3.3.5 Estimation of growth rate of Indian Oil Corporation
  • 5.6.3.3.6 Estimation of growth rate from fundamentals
  • 5.6.3.3.7 Estimation of growth rate in net income
  • 5.6.3.3.8 Estimation of growth rate in operating income
  • References
  • 6 Discounted cash flow valuation models
  • 6.1 Introduction
  • 6.2 Dividend discount model
  • 6.2.1 Special cases of DDM
  • 6.2.1.1 The constant growth DDM (Gordon growth model)
  • 6.2.1.2 Two-stage DDM model
  • 6.2.1.3 Financial characteristics of high growth and stable growth firms
  • 6.2.1.4 Two-stage H-model
  • 6.2.1.5 Three-stage dividend growth model
  • 6.2.2 Reflections on terminal value
  • 6.2.3 Practical difficulties in estimation of parameters in the DCF models
  • 6.2.4 Research studies related to DDM
  • 6.2.5 Estimation of value of ICBC through dividend models
  • 6.2.5.1 Valuation of ICBC using the stable DDM model
  • 6.2.5.2 Estimation of growth rate from fundamentals
  • 6.2.5.3 Valuation of ICBC using the two-stage DDM model
  • 6.2.6 Valuation of Reliance Industries Ltd using DDM.
  • 6.2.6.1 Estimation of value of equity.

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