In this paper, we used financial statements as the main information to calculate the enterprise
value by discounted cash flow model. For the prediction of future cash flows in DCF model, a new method
based on the Markov chain is proposed to get the growth rates of future cash flows, instead of the fixed growth
rate method. The superior performance of it can be illustrated in empirical analysis. And the result shows that
we can improve the accuracy of the enterprise value evaluation with partial information by using the Markov
chain
This document discusses liquidity ratios and how they can change based on a company's financial decisions. It defines two key liquidity ratios: the current ratio and acid test ratio. The current ratio measures current assets available to cover current liabilities, while the acid test only considers more liquid current assets. The document then demonstrates how taking on short-term debt or increasing capital can impact these ratios, making liquidity stronger by applying long-term resources to current assets but weaker by using short-term debt for fixed assets.
This document is a project report submitted by Mr. Ojas Nitin Narsale, an M.Com student at the Parle Tilak Vidyalaya Association's M.L. Dahanukar College of Commerce in Mumbai, India. The report is on the topic of ratio analysis and was completed in the 2016-2017 academic year under the guidance of Prof. Karim. The report includes an introduction, objectives, methodology, literature review on ratio analysis, calculations of key financial ratios for a company, analysis of the results, and a summary.
minor project on ratio analysis of "......"Kh Corporate
This document is a project report submitted by [NAME] to Guru Gobind Singh Indraprastha University in partial fulfillment of the requirements for a Bachelor of Business Administration degree. The report focuses on ratio analysis of a particular industry and includes chapters on the introduction, research methodology, industry overview, company profile, theoretical perspective on ratio analysis, findings and analysis, and conclusions and recommendations. The introduction provides an overview of the study and its objectives, scope, significance and limitations. The research methodology chapter outlines the statement of the research problem, data collection process, presentation tools used, and research tools.
A Study on Ratio Analysis at Accord Puducherryijtsrd
This document summarizes a study on ratio analysis of ACCORD Puducherry, an organization providing financial assistance to entrepreneurs. The study analyzed ACCORD's financial performance from 2015-2019 using ratio analysis and trend analysis of data collected from financial statements. Ratio analysis showed current ratio, net profit ratio, and other ratios were generally satisfactory. Trend analysis found stock levels fluctuated over the period while cash, receivables, and current assets trended upward. Working capital fluctuated. The study concluded ACCORD's financial position over the period was satisfactory but ratios could be improved further to boost growth. It recommended increasing working capital and profitability ratios to improve performance.
Here are the three main types of derivatives:
1. Futures - A futures contract is an agreement to buy or sell an asset at a predetermined price at a specified time in the future. This allows investors to hedge against market risk.
2. Options - An option gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date. Options provide flexibility.
3. Forwards - A forward contract is a customized bilateral agreement between two parties to buy or sell an asset at a specified price on a future date. Forwards are similar to futures but have individualized terms.
The key difference between these derivatives is around flexibility and obligations. Fut
This document is a study submitted by Afzalshah Sayed towards the partial fulfillment of a Master of Business Administration in Finance degree from IES Management College in Mumbai, India. The study examines fundamental analysis and is divided into multiple chapters that will cover qualitative and quantitative factors, financial statements, valuation and more. The student declares the work as original and grants the college rights to publish parts of the study.
Finance is the lifeblood and lifeline of any business entity either commercial or non-commercial. The
Survival, Stability and Sustainability of a firm is highly associated with its financial wellness. It can be observed through its ability to pay(re) short-term as well as long term liabilities, meeting the regular financial obligations, to increase the value of firm and ability to generate profit. Financial analysis, evaluation, and assessment help in determines the financial position and financial strength of a firm. Among the plenty of methods and tolls available for financial performance, ratio analysis is more useful and meaningful. These ratios make it possible to analyze the evolution of the financial situation of a firm (trend analysis), cross-sectional analysis and comparative analysis.
This document discusses liquidity ratios and how they can change based on a company's financial decisions. It defines two key liquidity ratios: the current ratio and acid test ratio. The current ratio measures current assets available to cover current liabilities, while the acid test only considers more liquid current assets. The document then demonstrates how taking on short-term debt or increasing capital can impact these ratios, making liquidity stronger by applying long-term resources to current assets but weaker by using short-term debt for fixed assets.
This document is a project report submitted by Mr. Ojas Nitin Narsale, an M.Com student at the Parle Tilak Vidyalaya Association's M.L. Dahanukar College of Commerce in Mumbai, India. The report is on the topic of ratio analysis and was completed in the 2016-2017 academic year under the guidance of Prof. Karim. The report includes an introduction, objectives, methodology, literature review on ratio analysis, calculations of key financial ratios for a company, analysis of the results, and a summary.
minor project on ratio analysis of "......"Kh Corporate
This document is a project report submitted by [NAME] to Guru Gobind Singh Indraprastha University in partial fulfillment of the requirements for a Bachelor of Business Administration degree. The report focuses on ratio analysis of a particular industry and includes chapters on the introduction, research methodology, industry overview, company profile, theoretical perspective on ratio analysis, findings and analysis, and conclusions and recommendations. The introduction provides an overview of the study and its objectives, scope, significance and limitations. The research methodology chapter outlines the statement of the research problem, data collection process, presentation tools used, and research tools.
A Study on Ratio Analysis at Accord Puducherryijtsrd
This document summarizes a study on ratio analysis of ACCORD Puducherry, an organization providing financial assistance to entrepreneurs. The study analyzed ACCORD's financial performance from 2015-2019 using ratio analysis and trend analysis of data collected from financial statements. Ratio analysis showed current ratio, net profit ratio, and other ratios were generally satisfactory. Trend analysis found stock levels fluctuated over the period while cash, receivables, and current assets trended upward. Working capital fluctuated. The study concluded ACCORD's financial position over the period was satisfactory but ratios could be improved further to boost growth. It recommended increasing working capital and profitability ratios to improve performance.
Here are the three main types of derivatives:
1. Futures - A futures contract is an agreement to buy or sell an asset at a predetermined price at a specified time in the future. This allows investors to hedge against market risk.
2. Options - An option gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date. Options provide flexibility.
3. Forwards - A forward contract is a customized bilateral agreement between two parties to buy or sell an asset at a specified price on a future date. Forwards are similar to futures but have individualized terms.
The key difference between these derivatives is around flexibility and obligations. Fut
This document is a study submitted by Afzalshah Sayed towards the partial fulfillment of a Master of Business Administration in Finance degree from IES Management College in Mumbai, India. The study examines fundamental analysis and is divided into multiple chapters that will cover qualitative and quantitative factors, financial statements, valuation and more. The student declares the work as original and grants the college rights to publish parts of the study.
Finance is the lifeblood and lifeline of any business entity either commercial or non-commercial. The
Survival, Stability and Sustainability of a firm is highly associated with its financial wellness. It can be observed through its ability to pay(re) short-term as well as long term liabilities, meeting the regular financial obligations, to increase the value of firm and ability to generate profit. Financial analysis, evaluation, and assessment help in determines the financial position and financial strength of a firm. Among the plenty of methods and tolls available for financial performance, ratio analysis is more useful and meaningful. These ratios make it possible to analyze the evolution of the financial situation of a firm (trend analysis), cross-sectional analysis and comparative analysis.
This document provides an introduction and overview of a project report on the fundamental analysis of the banking industry in India, with special reference to public sector banks. The report analyzes macroeconomic factors, assesses the performance of the banking industry, and uses financial analysis tools to evaluate and select high-performing banking companies over a five-year period from 2009-2013. The analysis focuses on metrics like net interest margin, credit-to-deposit ratio, non-performing asset ratio, earnings per share, and intrinsic value to compare company performance and make investment decisions.
This document provides an overview of valuing banks. It begins with an introduction to the banking industry and discusses the business of banking. The key aspects include banks functioning as financial intermediaries, generating income from interest spreads, and being regulated businesses. The document then covers various valuation approaches including income approach by projecting cash flows and a market approach using comparable publicly traded companies and transactions. It emphasizes adjusting valuation multiples based on growth prospects, profitability, market position and risks for the subject bank. Overall, the document provides a framework for analyzing the banking industry, the company, and applying different approaches to determine the value of a bank.
This document analyzes the effect of financial performance on stock prices of raw material producing companies listed on the Indonesian Stock Exchange from 2009-2013. It finds that variables like current ratio, debt to equity ratio, return on assets, and total asset turnover have a simultaneous significant effect on stock prices. However, in partial tests only total asset turnover is found to have an individually significant impact, while the other variables do not. The study uses multiple linear regression analysis on financial data from 7 sample companies to analyze the relationships between these financial metrics and stock price movements.
FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL LIMITEDyashmin khatun
This document discusses financial statement analysis and ratio analysis. It provides background on analyzing a company's financial stability, profitability, and performance over time using various ratios and comparisons. The objectives are to analyze the financial position, liquidity, and profitability of Bharti Airtel over a five year period and identify its financial strengths and weaknesses. Limitations include a lack of structured data from the company and a limited three year study period relying on secondary data. A literature review found previous research analyzing the relationship between working capital management, cash conversion cycles, and company profitability.
Hedge Equities Ltd is a leading financial services company in India that offers tailored financial products. It has expanded operations to the Middle East to serve the large non-resident Indian population. The project analyzes the risk-return relationship of five telecom companies in India to determine if the sector is suitable for investment. Financial ratios will be used to analyze the companies' performance and risk-return profiles. Recommendations will be provided on the best companies for investment based on the analysis.
Manu Nepali presented a project report on equity analysis and portfolio management at PGDM Batch from 2013-2015. The presentation included an overview of Trustline Securities Pvt. Ltd, explanations of equity analysis and the portfolio management process, research objectives to evaluate investment portfolios and analyze scheme performance and charges, a description of the research methodology used, key findings from analyzing client data, and suggestions such as maintaining regular client contact and increasing advertising.
This document analyzes the performance of Chinese listed companies before and after seasoned equity offerings. It examines four companies that conducted large private placements in 2012. Two companies, Guangdong Electric Power Development and Shanghai Tunnel Engineering, showed improved performance after the offering, indicating the funds were used efficiently. However, Henan Shuanghui Investment & Development and Hainan Airlines saw declining performance, likely due to inefficient use of funds and unhealthy financial structures. The analysis suggests that not all equity offerings benefit companies and investors, and listed firms should ensure capital is utilized effectively.
This document is a study submitted by K T Phanindra to the Institute of Public Enterprise in partial fulfillment of the requirements for a Post Graduate Diploma in Management. The study examines the impact of liquidity ratios on a company's profitability and performance. It includes an introduction to ratio analysis and its uses and limitations. The study will analyze different types of ratios including debt, liquidity, profitability, cash flow, and market value ratios. It will focus specifically on different debt ratios and how they impact a company's financial performance and profitability. The objectives are to understand the effect of debt ratios on performance and how managers use debt analysis in decision making. Secondary data from company financial statements will be used for the
Fundamental analysis and technical analysisMohammed Umair
This document discusses fundamental analysis techniques for evaluating securities. It defines fundamental analysis as focusing on underlying business factors like financials, management, and prospects to determine a security's value. The document outlines different levels of analysis, including analyzing the overall economy, individual industries, and specific companies. It provides examples of analyzing economic indicators, using Porter's Five Forces for industry analysis, evaluating competitors, and assessing profitability metrics. The goal of fundamental analysis is to answer questions about a company's growth, profits, competitive positioning, debt repayment ability, and accounting practices.
The document discusses fundamental analysis for evaluating stocks. It begins by defining fundamental analysis and its two main types: economic, industry, and company analysis. It then provides more details on each type of analysis. For economic analysis, it discusses important macroeconomic factors to examine like GDP, inflation, interest rates, etc. For industry analysis, it covers analyzing the industry life cycle and competitive landscape. For company analysis, it states the importance of examining the company's financial statements and resources. The overall document serves as an introduction to conducting fundamental analysis for stock evaluation.
This document provides an executive summary and introduction to a project conducting fundamental analysis of five banking companies in India over 45 days. The analysis included economic, industry, and company analysis to derive an intrinsic value for each stock and determine if it was overvalued or undervalued. Data was collected from annual reports and company websites and analyzed using techniques like CAMEL rating and intrinsic value calculation. The purpose was to forecast future stock prices and provide a basis for informed investment decisions.
Financial Analysis on Recession Period at M&M TractorsProjects Kart
Financial ANalysis (also stated as financial plan analysis or accounting analysis) refers to an assessment of the viability, stability and profitable of a business, sub-business or project. Visit www.projectskart.com for more information. It is performed by professionals World Health Organization prepare reports exploitation ratios that create use of data taken from monetary statements and different reports. These reports area unit typically given to prime management mutually of their bases in creating business selections.
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
Project report on fundamental analysis of scrips under banking sectoraftabshaikh04
This project report analyzes scrips under the banking sector in India. It provides an overview of SHCIL, including its subsidiaries and services offered. It then discusses the fundamentals of financial analysis, tools used including ratios and technical analysis. The report outlines the problem statement, objectives, methodology used and limitations. It performs analysis of the economy, banking industry and selected public and private sector banks. Key findings are that SBI is fairly valued based on P/E, PNB is undervalued, and HDFC Bank has highest expected future growth. All banks maintained capital requirements and SBI had the highest book value. Recommendations are to buy all banks except SBI and ICICI Bank.
The document provides an overview of the telecommunications industry in India. It discusses the evolution of the industry from a state-run monopoly to a liberalized sector with private participation. Key points include:
- India has the second largest telecommunications network in the world, with over 895 million connections as of December 2015.
- The industry has grown rapidly since the 1990s after economic liberalization opened the sector to private companies.
- Telecom has become a major driver of India's economic growth and development, contributing over 2% to GDP.
Mercer Capital's Value Focus: Medical Technology | Mid-Year 2015Mercer Capital
This document provides an overview and analysis of trends in the medical technology (medtech) industry. It discusses performance and outlook for various medtech market segments. It also reviews medtech mergers and acquisitions, venture capital activity, and valuation approaches for private medtech companies. Key points include growing venture capital interest in medtech, improving industry performance in the first half of 2015, demand drivers like an aging population, and increasing data analytics adoption in healthcare technology.
1. The document is a student's project report on the financial ratio analysis of Wipro. It includes an acknowledgment section thanking various professors and institutions for their support and guidance.
2. There is a declaration by the student stating that the project is their original work and submitted for their Master's degree program.
3. The project contains a certificate from the student's teacher guide confirming they completed the research project on the given topic under their guidance.
This document discusses ratio analysis and its importance for evaluating company performance. Ratio analysis involves grouping financial ratios into categories like liquidity and profitability to analyze variables like bankruptcy risk, loan defaults, and stock prices. Ratios allow comparison of a company's performance over time, against industry benchmarks, and between different time periods or industries. Ratio analysis is used by companies, investors, and creditors to evaluate financial position, predict future performance, and identify strengths and weaknesses. The document then provides an overview of the objectives, need, importance, scope, and methodology of ratio analysis as well as a profile of SujalaPipes Private Limited, the company used for this case study.
This document summarizes a study that analyzed the effect of earnings per share (EPS), net profit margin (NPM), and debt to equity ratio (DER) on return on assets (ROA) of companies listed on the LQ45 index of the Indonesia Stock Exchange between 2014-2018. The study used quantitative methods including multiple linear regression to determine the relationships. The results found that EPS and NPM had a positive and significant effect on ROA, while DER had a negative and insignificant effect. Together the independent variables explained 99.34% of the variation in ROA.
Corporate Bridge Group provides financial training programs and e-learning services. It has two verticals: 1) Edu Corporate Bridge which deals with instructor-led and online training programs in financial courses and exam preparatory courses. 2) Elearning Labz which develops custom e-learning content and solutions. The management team includes Dheeraj Vaidya as CEO, S. Premananda as MD, and Kayideni Kholi. Business valuation is complex and involves various financial and non-financial factors. Valuations are performed for different purposes such as transactions, disputes, compliance, and planning. Direct valuation methods like discounted cash flow models provide an explicit equity value by discounting estimated future cash flows.
The document discusses the discounted cash flow (DCF) valuation method. It examines both theoretical and practical aspects of DCF valuation. While DCF is a powerful valuation tool, it is highly dependent on assumptions and small changes to assumptions can significantly impact the valuation results. The document provides an example valuation of BASF to demonstrate the sensitivity of DCF valuation to changes in assumptions through scenario analysis.
This document provides an introduction and overview of a project report on the fundamental analysis of the banking industry in India, with special reference to public sector banks. The report analyzes macroeconomic factors, assesses the performance of the banking industry, and uses financial analysis tools to evaluate and select high-performing banking companies over a five-year period from 2009-2013. The analysis focuses on metrics like net interest margin, credit-to-deposit ratio, non-performing asset ratio, earnings per share, and intrinsic value to compare company performance and make investment decisions.
This document provides an overview of valuing banks. It begins with an introduction to the banking industry and discusses the business of banking. The key aspects include banks functioning as financial intermediaries, generating income from interest spreads, and being regulated businesses. The document then covers various valuation approaches including income approach by projecting cash flows and a market approach using comparable publicly traded companies and transactions. It emphasizes adjusting valuation multiples based on growth prospects, profitability, market position and risks for the subject bank. Overall, the document provides a framework for analyzing the banking industry, the company, and applying different approaches to determine the value of a bank.
This document analyzes the effect of financial performance on stock prices of raw material producing companies listed on the Indonesian Stock Exchange from 2009-2013. It finds that variables like current ratio, debt to equity ratio, return on assets, and total asset turnover have a simultaneous significant effect on stock prices. However, in partial tests only total asset turnover is found to have an individually significant impact, while the other variables do not. The study uses multiple linear regression analysis on financial data from 7 sample companies to analyze the relationships between these financial metrics and stock price movements.
FINANCIAL PERFORMANCE ANALYSIS OF BHARTI AIRTEL LIMITEDyashmin khatun
This document discusses financial statement analysis and ratio analysis. It provides background on analyzing a company's financial stability, profitability, and performance over time using various ratios and comparisons. The objectives are to analyze the financial position, liquidity, and profitability of Bharti Airtel over a five year period and identify its financial strengths and weaknesses. Limitations include a lack of structured data from the company and a limited three year study period relying on secondary data. A literature review found previous research analyzing the relationship between working capital management, cash conversion cycles, and company profitability.
Hedge Equities Ltd is a leading financial services company in India that offers tailored financial products. It has expanded operations to the Middle East to serve the large non-resident Indian population. The project analyzes the risk-return relationship of five telecom companies in India to determine if the sector is suitable for investment. Financial ratios will be used to analyze the companies' performance and risk-return profiles. Recommendations will be provided on the best companies for investment based on the analysis.
Manu Nepali presented a project report on equity analysis and portfolio management at PGDM Batch from 2013-2015. The presentation included an overview of Trustline Securities Pvt. Ltd, explanations of equity analysis and the portfolio management process, research objectives to evaluate investment portfolios and analyze scheme performance and charges, a description of the research methodology used, key findings from analyzing client data, and suggestions such as maintaining regular client contact and increasing advertising.
This document analyzes the performance of Chinese listed companies before and after seasoned equity offerings. It examines four companies that conducted large private placements in 2012. Two companies, Guangdong Electric Power Development and Shanghai Tunnel Engineering, showed improved performance after the offering, indicating the funds were used efficiently. However, Henan Shuanghui Investment & Development and Hainan Airlines saw declining performance, likely due to inefficient use of funds and unhealthy financial structures. The analysis suggests that not all equity offerings benefit companies and investors, and listed firms should ensure capital is utilized effectively.
This document is a study submitted by K T Phanindra to the Institute of Public Enterprise in partial fulfillment of the requirements for a Post Graduate Diploma in Management. The study examines the impact of liquidity ratios on a company's profitability and performance. It includes an introduction to ratio analysis and its uses and limitations. The study will analyze different types of ratios including debt, liquidity, profitability, cash flow, and market value ratios. It will focus specifically on different debt ratios and how they impact a company's financial performance and profitability. The objectives are to understand the effect of debt ratios on performance and how managers use debt analysis in decision making. Secondary data from company financial statements will be used for the
Fundamental analysis and technical analysisMohammed Umair
This document discusses fundamental analysis techniques for evaluating securities. It defines fundamental analysis as focusing on underlying business factors like financials, management, and prospects to determine a security's value. The document outlines different levels of analysis, including analyzing the overall economy, individual industries, and specific companies. It provides examples of analyzing economic indicators, using Porter's Five Forces for industry analysis, evaluating competitors, and assessing profitability metrics. The goal of fundamental analysis is to answer questions about a company's growth, profits, competitive positioning, debt repayment ability, and accounting practices.
The document discusses fundamental analysis for evaluating stocks. It begins by defining fundamental analysis and its two main types: economic, industry, and company analysis. It then provides more details on each type of analysis. For economic analysis, it discusses important macroeconomic factors to examine like GDP, inflation, interest rates, etc. For industry analysis, it covers analyzing the industry life cycle and competitive landscape. For company analysis, it states the importance of examining the company's financial statements and resources. The overall document serves as an introduction to conducting fundamental analysis for stock evaluation.
This document provides an executive summary and introduction to a project conducting fundamental analysis of five banking companies in India over 45 days. The analysis included economic, industry, and company analysis to derive an intrinsic value for each stock and determine if it was overvalued or undervalued. Data was collected from annual reports and company websites and analyzed using techniques like CAMEL rating and intrinsic value calculation. The purpose was to forecast future stock prices and provide a basis for informed investment decisions.
Financial Analysis on Recession Period at M&M TractorsProjects Kart
Financial ANalysis (also stated as financial plan analysis or accounting analysis) refers to an assessment of the viability, stability and profitable of a business, sub-business or project. Visit www.projectskart.com for more information. It is performed by professionals World Health Organization prepare reports exploitation ratios that create use of data taken from monetary statements and different reports. These reports area unit typically given to prime management mutually of their bases in creating business selections.
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
Project report on fundamental analysis of scrips under banking sectoraftabshaikh04
This project report analyzes scrips under the banking sector in India. It provides an overview of SHCIL, including its subsidiaries and services offered. It then discusses the fundamentals of financial analysis, tools used including ratios and technical analysis. The report outlines the problem statement, objectives, methodology used and limitations. It performs analysis of the economy, banking industry and selected public and private sector banks. Key findings are that SBI is fairly valued based on P/E, PNB is undervalued, and HDFC Bank has highest expected future growth. All banks maintained capital requirements and SBI had the highest book value. Recommendations are to buy all banks except SBI and ICICI Bank.
The document provides an overview of the telecommunications industry in India. It discusses the evolution of the industry from a state-run monopoly to a liberalized sector with private participation. Key points include:
- India has the second largest telecommunications network in the world, with over 895 million connections as of December 2015.
- The industry has grown rapidly since the 1990s after economic liberalization opened the sector to private companies.
- Telecom has become a major driver of India's economic growth and development, contributing over 2% to GDP.
Mercer Capital's Value Focus: Medical Technology | Mid-Year 2015Mercer Capital
This document provides an overview and analysis of trends in the medical technology (medtech) industry. It discusses performance and outlook for various medtech market segments. It also reviews medtech mergers and acquisitions, venture capital activity, and valuation approaches for private medtech companies. Key points include growing venture capital interest in medtech, improving industry performance in the first half of 2015, demand drivers like an aging population, and increasing data analytics adoption in healthcare technology.
1. The document is a student's project report on the financial ratio analysis of Wipro. It includes an acknowledgment section thanking various professors and institutions for their support and guidance.
2. There is a declaration by the student stating that the project is their original work and submitted for their Master's degree program.
3. The project contains a certificate from the student's teacher guide confirming they completed the research project on the given topic under their guidance.
This document discusses ratio analysis and its importance for evaluating company performance. Ratio analysis involves grouping financial ratios into categories like liquidity and profitability to analyze variables like bankruptcy risk, loan defaults, and stock prices. Ratios allow comparison of a company's performance over time, against industry benchmarks, and between different time periods or industries. Ratio analysis is used by companies, investors, and creditors to evaluate financial position, predict future performance, and identify strengths and weaknesses. The document then provides an overview of the objectives, need, importance, scope, and methodology of ratio analysis as well as a profile of SujalaPipes Private Limited, the company used for this case study.
This document summarizes a study that analyzed the effect of earnings per share (EPS), net profit margin (NPM), and debt to equity ratio (DER) on return on assets (ROA) of companies listed on the LQ45 index of the Indonesia Stock Exchange between 2014-2018. The study used quantitative methods including multiple linear regression to determine the relationships. The results found that EPS and NPM had a positive and significant effect on ROA, while DER had a negative and insignificant effect. Together the independent variables explained 99.34% of the variation in ROA.
Corporate Bridge Group provides financial training programs and e-learning services. It has two verticals: 1) Edu Corporate Bridge which deals with instructor-led and online training programs in financial courses and exam preparatory courses. 2) Elearning Labz which develops custom e-learning content and solutions. The management team includes Dheeraj Vaidya as CEO, S. Premananda as MD, and Kayideni Kholi. Business valuation is complex and involves various financial and non-financial factors. Valuations are performed for different purposes such as transactions, disputes, compliance, and planning. Direct valuation methods like discounted cash flow models provide an explicit equity value by discounting estimated future cash flows.
The document discusses the discounted cash flow (DCF) valuation method. It examines both theoretical and practical aspects of DCF valuation. While DCF is a powerful valuation tool, it is highly dependent on assumptions and small changes to assumptions can significantly impact the valuation results. The document provides an example valuation of BASF to demonstrate the sensitivity of DCF valuation to changes in assumptions through scenario analysis.
This document introduces the discounted cash flow (DCF) valuation method. It examines both the theoretical and practical aspects of DCF valuation. While DCF valuation is a powerful tool, it is highly dependent on assumptions and small changes to assumptions can significantly impact the valuation results. The document provides an example valuation of BASF to demonstrate how sensitive the DCF method is to changes in assumptions.
Community PsychologyInstructionsFor this task, select two schoLynellBull52
Community Psychology
Instructions
For this task, select two scholarly articles related to "context and environment" and "support systems as infrastructure."
1. Summarize, evaluate and analyze each article, adding your critique and insights. Be sure to use proper APA citation format for each article.
2. Each article should be added as a separate submission. For each article, include the following:
· A brief summary of the resource
· An evaluation of the resource, including the author’s background, document source, and intended audience
· An analysis of the article, including its relevance to the topic
· Proper citation in APA format
· Correct spelling, grammar, and professional vocabular
Q1-
The chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms’ managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.
Development of forecasts is extremely important as various stakeholders rely on them to make important financial decisions. Depending on who is making the forecast, there will be some difference as there will be different incentives and risks associated.
When a manager is making the forecast, he/she/they will be more optimistic as this will make their work and the image of the business positive. Managers can try different ways to give that optimistic outlook in their forecast. After all, it's their own business and it's their duty to be better. They also have incentive for career growth and may be extra bonuses and benefits.
When accountants are making the forecast, they tend to be more conservation as they will use all the rules and regulations strictly as they need to make sure they are protecting the reputation of Their own and the company they work for. It is also professional ethics to report unbiased forecasts and therefore they tend to be more conservation.
When an analyst is making a forecast, they tend to be different from the manager and the accountant as well because they aren’t only using the data from that company alone but are doing the industry analysis, economic analysis, and competitive analysis to make a realistic forecast. They evaluate all the past figures but also compare it and make the forecast. An analyst can’t get emotional and get biased. Therefore, analysts forecast a perfect balance between managers’ optimism and accountants’ conservatism.
Q2-
Six Interrelated Sequential Steps in Financial Statement Analysis
1.Identifying Economic Characteristics Competitive Dynamics in the Industry
One of the major as well as the first step necessary in the valuation process is Industry Analysis. It is very important to know the economic trends, what the competition is doing as well as how ma ...
Vskills financial modelling professional sample materialVskills
This document provides an overview of financial modelling, including:
1. Financial modelling involves creating mathematical representations of a company's financial performance and health over time based on historical data and assumptions. It is used for decision making, valuation, forecasting, and analysis.
2. Financial models project items like revenues, expenses, assets, liabilities, and cash flows. Common approaches include modelling items as a percentage of revenues or based on metrics like days sales outstanding.
3. Financial models are used by various parties for purposes like business valuation, scenario planning, capital budgeting, and cost of capital calculations. Spreadsheets are a common tool for building financial models.
This document summarizes a research study that aimed to develop a bankruptcy prediction model for manufacturing companies listed on the Indonesia Stock Exchange using cash flow ratios. The researcher used cash flow ratios as independent variables and financial distress as the dependent variable. Logistic regression analysis showed that the operating cash flow margin ratio was the most useful predictor of financial distress. The findings indicate that cash flow ratios can help manufacturing companies identify financial problems and take preventative measures to avoid distress.
The Validity of Company Valuation Using Dis.docxchristalgrieg
The Validity of Company Valuation
Using Discounted Cash Flow Methods
Florian Steiger
1
Seminar Paper
Fall 2008
Abstract
This paper closely examines theoretical and practical aspects of the widely used discounted
cash flows (DCF) valuation method. It assesses its potentials as well as several weaknesses. A
special emphasize is being put on the valuation of companies using the DCF method. The
paper finds that the discounted cash flow method is a powerful tool to analyze even complex
situations. However, the DCF method is subject to massive assumption bias and even slight
changes in the underlying assumptions of an analysis can drastically alter the valuation
results. A practical example of these implications is given using a scenario analysis.
____________
1
Author: Florian Steiger, European Business School, e-mail: [email protected]
Table of Contents
List of abbreviations ........................................................................................................... i
List of figures and tables ................................................................................................... ii
1 Introduction .................................................................................................................. 1
1.1 Problem Definition and Objective ...................................................................... 1
1.2 Course of the Investigation ................................................................................. 2
2 Company valuation ....................................................................................................... 2
2.1 General Goal and Use of Company Valuation ................................................... 2
2.2 Other Valuation Methods ................................................................................... 3
3 The Discounted Cash Flow Valuation Method ............................................................ 4
3.1 Approach of the Discounted Cash Flow Valuation ............................................ 4
3.2 Calculation of the Free Cash Flow ..................................................................... 5
3.2.1 Cash Flow to Firm and Cash Flow to Equity.................................................. 5
3.2.2 Building Future Scenarios .............................................................................. 6
3.3 The Weighted Average Cost of Capital ............................................................. 6
3.3.1 Cost of Equity ................................................................................................. 7
3.3.2 Cost of Debt .................................................................................................... 8
3.3.3 Summary ......................................................................................................... 9
3.4 Calculation of the Terminal Value ................................................... ...
Corporate Valuations “Techniques & Application”: A compilation of research oriented valuation articles.
Contents: Business valuation, Relative valuation, Sum of the parts valuation and value creation, ESOP valuation, Discounted Cash Flow Valuation, Enterprise Valuation etc.
Contents:
Business Valuation,
Relative valuation,
Sum of the Parts (SOTP) Valuation and Value Creation,
ESOP Valuation,
Discounted Cash Flow (DCF) Valuation,
Enterprise Valuation,
Valuation Discount Applicable to Holding Companies,
Valuation in Information Technology (IT) Sector,
RBI Valuation
Working capital management on kotak mahindra groupProjects Kart
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International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
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Private Equity Valuation Methods improve active equity portfolio by valuing a business/company that is the core task of the financial analyst. Most PE/VC firms estimate a company’s value with the help of Equity Valuation Methods. To evaluate an organization, there should be enough understanding of Venture Valuation, which is considered as the most holistic evaluation approach.
Ignacio Velez-Pareja : From the Slide Rule to the Black BerryFuturum2
1. The document discusses using financial modeling as a tool for business valuation and value management, rather than just for transactions like selling or buying a company.
2. It proposes developing a comprehensive financial model with traditional statements plus a cash budget to estimate how decisions impact future cash flows and value. This allows management to proactively shape the future rather than just reacting to the past.
3. The model incorporates factors like inflation, growth, and policies to evaluate risks and test scenarios. It is based on double-entry accounting to help ensure accuracy and identify errors.
The goal of working capital management is to
ensure that the firm is able to continue its operations and that
it has sufficient cash flow to satisfy both maturing short-term
debt and upcoming operational expenses. The current study
has concentrated on analysing the working capital
management of Larsen & Turbo Company based on their
liquidity, profitability positions and cash flow statements over
a decade. The study is based on secondary data collected
from the financial reports published in the official websites of
the company for a period of thirteen years from 2003-04 to
2015-16. The data have been analyzed using the financial and
statistical tools namely Ratio Analysis, cash flow and
Correlation Analysis. It has been found that the working
capital management of Larsen & Turbo is good and the
company has to improve its turnover ratios in the future.
This document analyzes the financial statements of a manufacturing company over two years, 2016-2015. The analysis finds that the company has good liquidity and profitability based on various financial ratios. Liquidity ratios like current ratio and quick ratio show the company has more short-term assets to cover liabilities in 2016 compared to 2015. Profitability ratios also improved from 2015 to 2016 as revenues and net profit increased. Asset turnover ratios indicate the company was more effective in 2016 at collecting debts and inventory sales. The analysis concludes the company has a good overall financial statement based on its liquidity, profitability and asset effectiveness.
This document is a project report on ratio analysis conducted at Shri Govardhansinghji Raghuvanshi Co-op Bank Ltd. The report includes an introduction to ratio analysis, its objectives and uses. It discusses the different types of ratios including liquidity, activity, leverage and profitability ratios. The report also outlines some limitations of ratio analysis. The project was conducted by Yash D. Pardeshi, a BBA student, under the guidance of their professor Mr. Sufiyan Bagwan for partial fulfillment of their BBA degree.
This document provides a comparative assessment of the stock valuation of Intel Corporation and Texas Instruments. It uses both absolute and relative valuation models, including discounted dividend, free cash flow, residual income, and market multiples models. The analysis finds that while Intel derives around 50% of its valuation from PCs, even a large decline in its PC market share would likely have only a minor impact on its overall valuation. It also determines that Texas Instruments' shares are a reasonable investment given its annual dividend, dividend growth history, and discounted cash flow valuation of around $55.9 billion compared to its recent market price of $52.6 billion.
Module 7 Discussion ForumDiscussion Statement of Cash and Financi.docxhelzerpatrina
Module 7 Discussion Forum
Discussion: Statement of Cash and Financial Analysis:
Discussion: Capital Budgeting and Financial Analysis
Review at least 2 academically reviewed articles on capital budgeting and 2 articles on financial analysis and complete the following:
A. Write an annotated bibliography of each article.
B. Based on the articles you reviewed, discuss what you learned
C. In addition, discuss how a manager would use the concepts in the articles you reviewed in managerial decisions.
Instructions:
1.Completed the above assignment by over 1000 words and references.
2.Read and respond to at least 3 of your classmates' posts. (Below posted my classmate discussions) Read a selection of your colleagues' postings. Respond to at least 3 of your classmates’ posts. (Each response should be 150 words, It should include the stuff like supporting their discussion and
Study Materials Link:
TextBook:https://saylordotorg.github.io/text_managerial-accounting/index.html
Lesson Lecture:
1. https://www.youtube.com/watch?v=TaND4xx28VM
2. https://www.youtube.com/watch?v=kYKqmWJtPKs
3. https://www.youtube.com/watch?v=x6dd0IHuC98
Assigned Reading/Study Materials
Use the following links to study Module 7 topics
Analysis of the Statement of Cash Flows:
https://saylordotorg.github.io/text_managerial-accounting/s16-how-is-the-statement-of-cash-f.html
Analysis of Financial Statements and Nonfinancial Data:
https://saylordotorg.github.io/text_managerial-accounting/s17-how-do-managers-use-financial-.html
3-Clasmate discussion
Discussion1:
PART A
De Motta, A., & Ortega, J. (2018). Incentives, Capital Budgeting, and Organizational Structure. Journal of Economics & Management Strategy, 22(4), 810-831. doi: 10.1111/jems.12033
According to this article, capital budgeting is a crucial element when it comes to shaping and establishing a stable organization structure (De Motta & Ortega, 2018). The article focuses on several vital organizational issues that should be looked at keenly if an organization wants to be successful and competitive in the long run. The authors highlight that for an organization to be successful when making investments, it must do a thorough analysis of a project. As much as diversification and expansion would greatly help the organization achieve its set goals and objective and also improve its profitability, it is paramount to evaluate the investments. Capital investments are known to require substantial capital and resources so that they can successfully be implemented. Additionally, the article highlights that an organization ought to ensure that they have enough capital resources before deciding to invest in many capital projects. Last but not least, the article stresses the importance of organizations comparing the costs incurred when implementing a project and the resulting benefits to know if the project is financially viable.
Hoffmann, S., Krumholz, N., & O’Brien, K. (2018). How Capital Budgeting Helped a Sick City: Thirty Years.
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The evaluation of enterprise value based on partial information
1. International Journal of Business Marketing and Management (IJBMM)
Volume 5 Issue 2 February 2020, P.P.108-116
ISSN: 2456-4559
www.ijbmm.com
International Journal of Business Marketing and Management (IJBMM) Page 108
The evaluation of enterprise value based on partial information
Panlu Shi 1
, Wanxiao Tang 2
, Peibiao Zhao 3
1,2,3
(School of Science/ Nanjing University of Science and Technology, China)
ABSTRACT : In this paper, we used financial statements as the main information to calculate the enterprise
value by discounted cash flow model. For the prediction of future cash flows in DCF model, a new method
based on the Markov chain is proposed to get the growth rates of future cash flows, instead of the fixed growth
rate method. The superior performance of it can be illustrated in empirical analysis. And the result shows that
we can improve the accuracy of the enterprise value evaluation with partial information by using the Markov
chain.
Keywords: discounted cash flow model, enterprise value assessment, Markov chain, financial statements.
I. INTRODUCTION
In the current world, facing the rapid development of economy and the keen competition of the market, how to
maximize the value of the company has naturally become the strategic objective of business activities.
Estimating the company value is one of the effective means to achieve the optimal goal of financial
management. At present, with the development of the assets appraisal industry, it is of great significance to
research the estimation of the company value in the investment decision-making, the measurement of enterprise
value and the assessment of manager performance.
The enterprise value assessment originated from the assets appraisal industry, which has a development history
of more than two hundred years. There are different interpretations of the word ‘value’ in social activities,
generally we think it is a ranking or a measure of the size of assets. Nowadays, we mainly have two kinds of
different value judgment standards: 1). Fair market value, which means the trading price in buying assets or
debt. 2). Book value, which equals to the net asset value.
Generally speaking, the enterprise value assessment is a comprehensive assessment of the market value of
companies, according to the asset condition and predictable profitability. The company should be seen as an
indivisible whole and the economic environment and industry background of the company must be fully
considered. For managers, investors, analysts and other operators of market activities, they can formulate the
optimal management and investment strategy to create long-term profits for enterprises by using a scientific and
reasonable valuation model to evaluate enterprise value.
With the improvement and development of the securities market, the possibility of gaining extra profits by
speculations is gradually reducing and the corresponding risks are also increasing. The result of enterprise value
assessment will have an impact on the company’s future investments and its profits. Under this background, it is
very important to find a reasonable and effective valuation model for enterprise value assessment.
Up to now, the enterprise value assessment has been studied extensively. Because of earlier starting, foreign
researches have contained a wide range of research routes. Irving Fisher, a famous American economist, is the
founder of the theory of enterprise value assessment. He first described the sources of value. Williams proposed
the concept of Discounted Cash Flow (DCF) in his book ‘The Theory of Investment Value’ [1]. Black Scholes
put forward the option pricing model. After that, economists have researched many extension methods for the
enterprise value assessment. Mary's paper shows that the annual financial statement data of the same enterprise
is stable, and we can effectively predict and estimate the future data based on past information [2]. Richard and
Lee used DCF method to estimate the Dow-Jones industrials and found that DCF method is better than relative
valuation method [3]. Imam thinks that DCF method can better reflect the value of high-tech industry and PB
valuation method is more suitable for listed companies of financial sectors, because most of the assets owned by
them are highly liquid assets and the book value is roughly the same as the market value [4].
2. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 109
For the prediction of cash flows in this paper, there are also many related studies abroad. Badr and Choi found
that the factors that influence the profits and cash flows are the company's operation scale, funding level, outside
competition etc., which also affect the accuracy of the prediction for cash flows [5].
It can be said that the researches on enterprise value assessment in the US-led Western developed countries have
had a complete system, and there are many deep analyses. And in Chinese market, the enterprise value
assessment started in the late 1980s. Although the early academic materials in this field are almost from the
translation of foreign literatures, there have been many directions of thinking and research in recent decades.
After studying Shenzhen A-share listed companies, Li put forward a method to improve the discounted cash
flow model by option pricing model [6]. Jiang studies the financial statements of enterprises and analyzes the
impact of listing on enterprise value [7]. Yan analyzed the high-tech industry, divided the life cycle of this
industry into three stages, studied the value composition and inner drive of enterprise in different stages, and put
forward the corresponding value assessment methods [8]. And there are many researches on the forecasting
method of future cash flows, such as BP algorithm based on neural networks and cash flows forecasting model
based on EWMA-VAR.
It is obviously that there are a lot of research literature about the enterprise value assessment. But the valuation
method considering partial information is not complete. In fact, the company information we can get is limited
in the real market. So, in this paper, the enterprise value assessment is based on the analysis of financial
statements released by the company every year and the discounted cash flow method. And it is also the situation
faced by most of the investors and analysts.
Based on the original discounted cash flow model, we use Markov chain to forecast cash flows to
improve the accuracy of valuation. The significance of this paper is exploring a new valuation method based on
partial information in practice. And the financial statements are chosen as the source of information, because
they are released to the public by listed companies and easy to obtain. This new method is reasonable and
applicable to the established organizations and is meaningful to the enterprise value assessment.
II. PRELIMINARIES
There are many different valuation models for enterprise value assessment, and according to the available
information we can choose the method which is the best fit. Some methods are commonly used in the evaluation
process, some of them should be used in special cases, and there are also cases that need to combine a variety of
models.
In this paper, we get the free cash flow data of enterprises from financial statements as basic information and
then use the discount cash flow model. Therefore, we introduce the DCF model in this section.
The DCF model assumes that the current price equals the sum of those expected future cash flows discounted at
a constant discount rate. And we always use the weighted average cost of capital (WACC) as a discount rate for
estimated future cash flows. The WACC is the average cost the company pays for capital from borrowing or
selling equity.
There are two steps in DCF model, the first step is to predict the annual free cash flow (FCF) and weighted
average cost of capital (WACC).
The second step is to convert the future free cash flows into the present value under the assumption that the
dividend increasing rate and the capital-cost rate remain unchanged.
The calculation formula is
( ) ( ) ( )
( )
( )
And is the value of the company;
is the future free cash flow (the subscript indicates the year);
is the value of the last forecast year;
is the growth rate of free cash flows.
3. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 110
This model is the most commonly used valuation model at present, and it is also the important theoretical basis
of the valuation method in this paper.
The main advantages of DCF model are compatibility and validity. When using this method to calculate the risk
discount rate, it can accurately evaluate the value of companies with high financial leverage ratio. At the same
time, it is obvious that the value of the company is time-related. This method emphasizes the consideration of
future value and future earnings when evaluating the value of companies, so it has high reliability and good
accuracy.
The prediction of future cash flows in DCF model is derived from the historical data in companies’ own
financial statements. Compared with analyzing the cash dividends in DDM method, the analysis of free cash
flows can better deal with the actual situation of cash dividends of listed companies.
However, the DCF method also has disadvantages. It is difficult to predict the future free cash flows, especially
for the companies in growth period and companies with cyclical businesses. Furthermore, this problem will lead
to inaccurate results of enterprise value assessment.
III. THE PREDICTION OF FUTURE CASH FLOWS
In section two, we have made a brief introduction to the discounted cash flow model. As we have known, the
difficulty of this method lies in the prediction of future cash flows. When using this model, we need to analyze
the data of previous years’ cash flows to predict the growth rate of cash flows in the next few years.
Generally, the growth rate of a company's future cash flows is regarded as a constant value. And this prediction
method is called as fixed growth rate model. We take the average value of the known past growth rates as the
fixed growth rate in the prediction.
Assuming that the free cash flow in the first year of forecast period is , according to the fixed growth rate
model, the free cash flows in subsequent forecast period can be calculated, and the formula is as follows:
( ) ( )
And the original model can be written as
∑
( )
( ) ( )
( )
( )
( )
Where is the final forecast period; is the fixed growth rate of free cash flows.
However, we know that the growth rates are changing in fact. So, in this paper, in order to improve the
flexibility and accuracy of the growth rate prediction as much as possible, the Markov chain is used for model
extension.
In stochastic mathematics, we have the following definition.
Let the state space E of random process * + be a denumerable set, assume that
* +, if , satisfy the following equation:
( ) ( ) ( )
then we call * + is a Markov chain [9].
Through the analysis of financial statements, we can find that the growth rate of cash flows in this year
largely affects it in the next year. For example, if a large amount of funds is invested in this year and the cash
flow in that year is greatly reduced, then it is likely to receive the return on investment in the next year so the
growth rate of cash flows will increase. Of course, the cash flows data in previous years will also have an impact
on the future, but it can be found that the impact is very small compared with that in the current year, especially
for established enterprises. Therefore, it is reasonable to regard the stochastic process of growth rates as Markov
process.
4. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 111
We roughly divide the growth rates of cash flows into four events: * + means a significant
increase of cash flow in year N; * + means the cash flow increases steadily in year N; * + means a
steady decrease of cash flow in year N; * + means a significant decrease of cash flow in year N.
We can determine a transition matrix P according to the relationship among the above four events, and
the specific matrix data can be obtained by analyzing the financial statements. The transition matrix that is also
called the environment of Markov chain is a key factor of Markov chain, in this paper, we get it as
[ ] ( )
where equals ( ).
According to the theorem of Chapman Kolmogorov equation:
1. For we have
( )
∑
( ) ( )
2. ( ) ( ) ( )
;
3. ( ) ( )
.
Therefore, we can use the transition matrix to calculate the probability distribution of the growth rates
in the following years, and then get the mathematical expectation to get the forecasting result of cash flows.
The specific methods of operation will be detailed in the next section.
IV. EMPIRICAL ANALYSIS
The example company selected in this section is China National Accord Medicines Corporation Ltd.
The main data are from the company's financial statements published on the CSRC's website.
We use the financial statement data from 2002 to 2012 released by China National Accord Medicines
Corporation Ltd. to predict the growth rates of cash flows after 2012, with a forecast period that is 6 years. And
the predicted results will be compared with actual data. Here are the cash-flow data from 2002 to 2012.
Table 1: the cash-flow data of China National Accord Medicines Corporation Ltd from 2002 to
2012
Year 2002 2003 2004 2005 2006 2007
Cash flow 42,191,078 54,350,572 -64,807,660 88,420,748 36,053,789 49,492,597
Growth
rate
0.2882 -2.192 2.3643 -0.592 0.3727
Year 2008 2009 2010 2011 2012 /
Cash flow 101,860,089 191,610,628 100,125,201 224,723,366 122,863,881 /
Growth
rate
1.0580 0.8811 -0.4774 1.2444 -0.4532 /
5. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 112
Fig 1: the cash-flow data of China National Accord Medicines Corporation Ltd from 2002 to 2012
From the table 1 and Fig 1, we can clearly see that the annual cash flows of the enterprise present a
obvious trend of rising. But in 2004 there was a drop in data. As the cash flows are affected by many factors,
this situation may be related to the operating decision of the enterprise in 2004, such as increasing production
and expanding investment scale, which are normal.
Fig 1: the cash-flow data of China National Accord Medicines Corporation Ltd from 2002 to 2012
Firstly, we use the fixed growth rate model. The average growth rate of known cash flows 0.2993.
According to ( ) , we can get the predicted future cash-flow data.
Figure 2: the future cash-flow data predicted by the fixed growth rate model
6. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 113
However, based on the known data and understanding, it can be seen that the free cash flows of the
company sometimes change dramatically. Therefore, we need to use the forecast model based on Markov chain,
which is introduced in section three, to optimize the results.
The available data of one enterprise is limited. So, we can choose several similar companies in the
same industry to supplement the data. In this paper, Yunnan Baiyao, Northeast Pharm, Renhen Pharmaceutical
Co. Ltd and BBCA Pharmaceutical are selected as similar enterprises, and their cash-flow data are collected and
analyzed to obtain the transition matrix .
[ ]
By researching the financial statements of China National Accord Medicines Corporation Ltd for many
years, we can find that the enterprise has solid businesses., In addition, we consider that the China National
Accord Medicines Corporation Ltd is a full-fledged enterprise, and cash flows will continue to increase in the
future. So, we determined that when , the growth rate is 3.8, 1.2, - 0.4, - 3.3, respectively. In other
words, ; ; ; .
It is known that the growth rate from 2011 to 2012 is -0.4532, which belongs to event 3 * +.
Then the probability distribution of growth rate from 2012 to 2013 can be obtained according to the
third row of P, and the cash flow in 2013 can be calculated, as ∑ ( )
.
Naturally, we get
[ ]
where means ( ) .
So, we get the probability distribution of the growth rate from 2013 to 2014. According to the above
data of 2013, we calculate the cash flow of 2014 as 169395509.
And so on,
[ ]
[ ]
In this way, we introduce Markov chain into the discounted cash flow method, and we can get the prediction of
future cash flows.
7. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 114
Figure 3: the future cash-flow data predicted by the Markov chain
In DCF model, we have to calculate the value of WACC for enterprise value assessment. According to
the practical data of the company and market, ≈0.0842.
Then using equation (2.1) and (2.2), we can have the result of enterprise value assessment.
Figure 4: the actual cash-flow data from 2013 to 2018
Table 2: the comparison table of enterprise value assessment results
Method the fixed growth rate
model
the Markov chain actual data
The result of enterprise
value assessment
5,795,993,591 7,353,461,797 9,339,855,201
Error 0.3794 0.2100 /
From table 2, we can clearly find that the accuracy of enterprise value assessment has increased a lot
with the future cash-flow data predicted by the Markov chain. It shows that the improvement of the original
discounted cash flow model in this paper is reasonable, and the method has certain practicability. That is, based
on the company's financial statements, we can use the method to estimate the value of mature companies.
8. The evaluation of enterprise value based on partial information
International Journal of Business Marketing and Management (IJBMM) Page 115
Figure 5: the cash-flow data predicted by Markov chain and the actual cash-flow data
From Figure 5, we can see that the overall trend of the forecast results is consistent with the actual
situation. And the deviation in prediction mainly comes from the wide fluctuations of cash-flow data in 2014
and 2015.
Considering the internal factors, the significant decrease in cash flow of business operations in 2014 is
due to purchasing goods and paying for labor services. At the same time, there is a large outflow of cash flow in
investment. The company's subordinate industrial enterprises continue to invest in research and development,
which increases the expenditure in this period to improve innovation ability. In 2015, because of the increasing
in sales and the acceleration of capital return, the net cash flow from business operations increased by 231.54%
over 2014. The capital investment in 2014 had gradually begun to get profits.
Considering the external business environment, the frequent occurrence of policies related to the
pharmaceutical industry within one year indicates that 2015 is a key year for the company. It can be seen that
the market environment in 2015 has a great role in promoting the development of the China National Accord
Medicines Corporation Ltd.
V. CONCLUSION
The main innovation of this paper is to give an enterprise value assessment method with partial information. The
original DCF model is extended by Markov chain to make the result more accurate. At present, the method of
using financial statements to estimate company value is still being explored. This paper makes some new
exploration.
In section 1, we summarized the principle of enterprise value assessment and some existing researches. And the
DCF models used in this paper are introduced in detail in section 2. In section 3, this paper improved the
original prediction method of the future cash flow of the company, and introduces the concept of Markov
process to get the extended model. Then, in section 4, based on the DCF model and the predicted future cash
flow, the value of the case company is estimated. We compared the estimated value with the actual value, and
analyze the error causes briefly.
Of course, the inadequacy of this study is that the method used has some limitations. It is only suitable for
established organizations and the estimation error is difficult to eliminate due to the change of the company's
business strategy and industrial environment.
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