Finance > QUESTIONS & ANSWERS > Financial Management - Lecture Ten Q&A 2023 Update (All)

Financial Management - Lecture Ten Q&A 2023 Update

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How to value a firm? - ANS-Estimate expected future cash flows Estimate cost of capital (r). International macro - Domestic macro - Industry - Firm. Security analysis includes: - ANS-1) Equity val ... uation: -One measure to value a company -Uses models such as the dividend discount model (DDM) and price-to-earnings (P/E) model. 2)Financial statement analysis: -Analysis of accounting data. 3)Macroeconomic and industry analysis: -The aggregate economy, including international economy and the firm's position within the industry. -To evaluate the business environment in which the firm operates. Why is stock valuation important? - ANS-Assessing investment opportunities: -If the market is undervaluing a given stock - buying signal -If the market is overvaluing a stock - selling signal What is fundamental analysis? - ANS--If you are a security analyst, in order to determine a proper price for a firm's stock, you must forecast the dividends and earnings that can be expected from the firm. -Fundamental analysis is the analysis of the determinants of value for a firm. -Ultimately, the business success of the firm determines the dividends it can pay shareholders and the price it will command in the stock market. -Fundamental analysts are those analysts who use information concerning the current and prospective profitability of a company to assess its fair market value. Distinguish this from technical analysts in last week's lecture. Why study fundamental analysis? Continues... [Show More]

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