Higher Education

Business Analysis and Valuation: Using Financial Statements, Text and Cases, 5th Edition

  • includes Thomson Analytics Printed Access Card
  • Krishna G. Palepu Harvard University
  • Paul M. Healy Harvard University
  • ISBN-10: 1111972281  |  ISBN-13: 9781111972288
  • 960 Pages
  • Previous Editions: 2008, 2004, 2000
  • © 2013 | Published
  • College Bookstore Wholesale Price = $352.25

About

Overview

BUSINESS ANALYSIS & VALUATION: USING FINANCIAL STATEMENTS, TEXT & CASES, 5E has a valuation emphasis and focuses on a four-part framework: (1) business strategy analysis for developing an understanding of a firm's competitive strategy; (2) accounting analysis for representing the firm's business economics and strategy in its financial statements, and for developing adjusted accounting measures of performance; (3) financial analysis for ratio analysis and cash flow measures of operating; and (4) prospective analysis. The text shows how this business analysis and valuation framework can be applied to a variety of decision contexts: securities analysis, credit analysis, corporate financing policies analysis, mergers and acquisitions analysis, and governance and communication analysis. This text also offers one Harvard case per chapter as well as an entirely separate section (Section 4) for additional cases!

Features and Benefits

  • Focus on Valuation. Students primarily learn to value companies by using current book values and forecasts of earnings.
  • Flexible Focus for Maximum Student Impact. The textbook is designed to provide a framework for students interested in a wide range of business careers, including financial analysts, investment bankers, consultants, and corporate managers.
  • Harvard Business School Cases: Cases are supported by textual material that explains the techniques to be used, the theory and evidence behind them, and the detailed institutional context in which the practical applications are conducted to assure that students develop strong practical skills using real world applications.
  • Coverage of Entity Issues: Explanation of how to measure a multi-business unit firm's value is given in detail.
  • End-of-Chapter Material: Quality 'Discussion Questions' (about 10 per chapter) give students the opportunity to apply the concepts learned in the text without having to assign one of the many cases.
  • Instructor's Manual: For students who need more help working a case, the manual includes a set of detailed questions that can be handed out before class. For students requiring less structure, there are recommended questions at the end of each case.
  • Decision Context: Each case presents business analysis and valuation issues in specific decision contexts, which makes the material more interesting and exciting.
  • Four Types of Financial Statement Analysis: (1) business strategy analysis for developing an understanding of a firm's competitive strategy; (2) accounting analysis for representing the firm's business economics and strategy in its financial statements, and for developing adjusted accounting measures of performance; (3) financial analysis for ratio analysis and cash flow measures of operating; and (4) prospective analysis.
  • Applications of financial statement analysis include: (1) credit analysis; (2) securities analysis; (3) analysis of mergers, acquisitions, and other corporate restructuring; (4) analysis of financing policies: capital structure, and dividend policy; (5) analysis of management communication strategies. Where applicable, relevant institutional details and results of academic research are also incorporated.
  • Revenue Recognition: Coverage detailing the challenges in revenue recognition such as how to account for payment in advance, multi-period contracts, and bundled services or products is included. Discussion of the credit-worthiness of customers and dissatisfaction about service performance is also included.
  • Expense Recognition and Allocation: Coverage of depreciation, amortization, asset cost allocation and asset devaluation as they affect the financial statements.
  • Chapters on accounting analysis: Accounting analysis is presented from an income statement and balance sheet perspective and includes a chapter on accounting adjustments.
  • Software BAV Tool: The tool allows the analyst to import financial statements of a company, create a set of financial statements in a standardized format to facilitate analysis, and implement the key steps of analysis discussed in the book. User-friendly interface and drop down menus allow the analyst to navigate through the tool with ease. Built-in databases of historical financial ratios allow students to compare their forecasting assumptions with historical trends.
  • Thomson ONE: Business School Edition is a web-based portal product that provides integrated access to Thomson Financial content for the purpose of financial analysis. This new web-based application delivers the most powerful and flexible tools available for turning critical market data into actionable intelligence for educational purposes! Thomson ONE: Business School Edition is an educational version of the same financial resources used by Wall Street analysts on a daily basis.

Table of Contents

I. FRAMEWORK.
1. A Framework for Business Analysis and Valuation Using Financial Statements.
Case: New Century Financial.
II: BUSINESS ANALYSIS AND VALUATION TOOLS.
2. Strategy Analysis.
Case: Visio, Inc.
3. Overview of Accounting Analysis.
Case: The Fall of Enron.
4. Implementing Accounting Analysis.
Case: Accounting for the iPhone at Apple, Inc.
5. Financial Analysis.
Case: United Parcel Service's IPS.
6. Prospective Analysis: Forecasting.
Case: Krispy Kreme Doughnuts.
7. Prospective Analysis: Valuation Theory and Concepts.
Case: Valuation Ratios in the Restaurant Industry.
8. Prospective Analysis: Valuation Implementation.
Case: Home Depot, Inc., in the New Millennium.
III. BUSINESS ANALYSIS AND VALUATION APPLICATIONS.
9. Equity Security Analysis.
Case: Oddo Securities: ESG Integration.
10. Credit Analysis and Distress Prediction.
Case: Liz Claiborne.
11. Mergers and Acquisitions.
Case: Eddie Bauer (A).
12. Communication and Governance.
Case: Target Corporation: Ackman versus the Board.
IV. ADDITIONAL CASES.
The Role of Capital Market Intermediaries in the Dot-Com Crash of 2000.
Harnischfeger Corporation.
Revenue Recognition Problems in the Communications Equipment Industry.
Amazon.com in the Year 2000.
Schneider and Square D.
Financial Reporting Problems at Molex, Inc. (A).
America Online, Inc.
Boston Chicken, Inc.
Hewlett-Packard-Compaq: The Merger Decision.
The Home Depot, Inc.
Pre-Paid Legal Services, Inc.
Subprime Crisis and Fair Value Accounting.
Leasing Decision at Magnet Beauty Products, Inc.
The Risk Reward Framework at Morgan Stanley Research.
Sidoti & Company: Launching a Micro-Cap Product.
Corruption at Siemens (A).

What's New

  • New Harvard Business School Cases: Many cases in the Fifth Edition are new, such as Vizio, Inc., Oddo Securities, This Risk-Reward Framework at Morgan Stanley Research, and Sidoti & Company. Cases are supported by textual material that explains the techniques to be used, the theory and evidence behind them, and the detailed institutional context in which the practical applications are conducted to assure that students develop strong practical skills using real world applications.
  • Updated Examples. Both the smaller, in-chapter examples and the larger, multi-chapter example using new companies TJX and Nordstrom have been revised and updated for currency so students have the latest information to support concepts in the text.
  • New Multi-Chapter Example Companies. For the fifth edition, the multi-chapter example uses TJX and Nordstrom, and is more fully integrated and developed to illustrate the business analysis and valuation process to include accounting adjustments.
  • New Coverage of both Unadjusted and Adjusted Financial Statements for Analysis. For the fifth edition, new companies TJX and Nordstrom illustrate ratio analysis in Chapter 5 using both unadjusted and adjusted financial statements.
  • Revised and Updated IFRS Coverage. The discussion of US GAAP / IFRS convergence, discussion and examples on comparing IFRS/US GAAP companies, and brief discussion on remaining differences between IFRS and US GAAP have been updated for currency.
  • Expanded Discussion of Fair Value with New Case. A new case on the subprime crisis and fair value accounting highlights the updated coverage of fair value in 5e.
  • New Online Version of BAV Software. This financial statement analysis and valuation tool has a new, online interface and features, making data imports easier and analysis clearer and more graphical.

Supplements

All supplements have been updated in coordination with the main title. Select the main title's "About" tab, then select "What's New" for updates specific to title's edition.

For more information about these supplements, or to obtain them, contact your Learning Consultant.

Instructor Supplements

Solutions Manual  (ISBN-10: 1133372481 | ISBN-13: 9781133372486)

Meet the Author

Author Bio

Krishna G. Palepu

Krishna G. Palepu is the Ross Graham Walker Professor of Business Administration and Senior Associate Dean for International Development at the Harvard Business School, Harvard University. Prior to assuming his current administrative position, Professor Palepu held other positions at the school, including Senior Associate Dean, Director of Research, and Chair, Accounting and Control Unit. Professor Palepu's current research and teaching activities focus on strategy and governance. In the area of strategy, his recent focus has been on the globalization of emerging markets. In the area of corporate governance, Professor Palepu's work focuses on how to make corporate boards more effective, and on improving corporate disclosure. Professor Palepu teaches these topics in several HBS programs aimed at members of corporate boards: "How to make corporate boards more effective, "Audit Committees in the new era of governance, "Compensation Committees: Preparing the challenges ahead." Professor Palepu has done extensive research on mergers and acquisitions and corporate disclosure. Based on this work, he coauthored the book, Business Analysis and Valuation: Text and Cases, which won the American Accounting Association's Wildman Award for its impact on management practice, as well as the Notable Contribution to the Accounting Literature Award for its impact on academic research. This book, translated into Chinese, Japanese, and Spanish, is widely used in leading MBA programs all over the world. It is accompanied by a business analysis and valuation software model published by the Harvard Business School Publishing Company. Professor Palepu has a doctorate from the Massachusetts Institute of Technology, and an Honorary Doctorate from the Helsinki School of Economics and Business Administration.

Paul M. Healy

Paul M. Healy is James R. Williston Professor of Business Administration, and Unit Head, Accounting and Management, at Harvard Business School, Harvard University. Professor Healy joined Harvard Business School as a Professor of Business Administration in 1997. Professor Healy received his B.C.A. Honors (1st Class) in Accounting and Finance from Victoria University, New Zealand in 1977, his M.S. in Economics from the University of Rochester in 1981, his Ph.D. in Business from the University of Rochester in 1983, and is a New Zealand CPA. In New Zealand, Professor Healy worked for Arthur Young and ICI. Prior to joining Harvard, Professor Healy spent fourteen years on the faculty at the M.I.T. Sloan School of Management, where he received awards for teaching excellence in 1991, 1992, and 1997. He is the co-author of one of the leading financial analysis textbooks, Business Analysis & Valuation. In 1993-94 he served as Deputy Dean at the Sloan School, and in 1994-95 he visited London Business School and Harvard Business School. Professor Healy's research includes studies of the role and performance of financial analysts, how firms' disclosure strategies affect their costs of capital, the performance of merging firms after mergers, and managers' financial reporting decisions. His work has been published in The Accounting Review, Journal of Accounting and Economics, Journal of Accounting Research, and Journal of Financial Economics. In 1990, his article "The Effect of Bonus Schemes on Accounting Decisions," published in Journal of Accounting and Economics, was awarded the AICPA/AAA Notable Contribution Award. His text Business Analysis & Valuation was awarded the AICPA/AAA's Wildman Medal for contributions to the practice in 1997 and the AICPA/AAA Notable Contribution Award in 1998.