Abstract

http://ssrn.com/abstract=161222
 
 

References (29)



 
 

Citations (79)



 
 

Footnotes (17)



 


 



Ratio Analysis and Equity Valuation


Doron Nissim


Columbia University - Columbia Business School

Stephen H. Penman


Columbia University - Department of Accounting

March 1999


Abstract:     
This paper outlines a financial statement analysis for use in equity valuation. Standard profitability analysis is incorporated, and extended, and is complemented with an analysis of growth. The perspective is one of forecasting payoffs to equities. So financial statement analysis is presented first as a matter of pro forma analysis of the future, with forecasted ratios viewed as building blocks of forecasts of payoffs. The analysis of current financial statements is then seen as a matter of identifying current ratios as predictors of the future ratios that drive equity payoffs. The financial statement analysis is hierarchical, with ratios lower in the ordering identified as finer information about those higher up. To provide historical benchmarks for forecasting, typical values for ratios are documented for the period 1963-1996, along with their cross-sectional variation and correlation. And, again with a view to forecasting, the time series behavior of many of the ratios is also described and their typical "long-run, steady-state" levels are documented.

Number of Pages in PDF File: 68

JEL Classification: G12, M41

working papers series


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Date posted: May 11, 1999  

Suggested Citation

Nissim, Doron and Penman, Stephen H., Ratio Analysis and Equity Valuation (March 1999). Available at SSRN: http://ssrn.com/abstract=161222 or http://dx.doi.org/10.2139/ssrn.161222

Contact Information

Doron Nissim (Contact Author)
Columbia University - Columbia Business School ( email )
3022 Broadway
604 Uris Hall
New York, NY 10027
United States
212-854-4249 (Phone)

Stephen H. Penman
Columbia University - Department of Accounting ( email )
3022 Broadway
New York, NY 10027
United States
212-854-9151 (Phone)
212-316-9219 (Fax)

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References:  29
Citations:  79
Footnotes:  17

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