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Financial Statement Analysis and Securit
Financial Statement Analysis and Securit
Analysis and
Security Valuation
Fourth Edition
Stephen H. Penman
Columbia University
McGraw-Hill
Irwin
Boston Burr Ridge, IL Dubuque, IA Madison, Wl New York San Francisco St. Louis
Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
Contents
Chapter 10 Chapter 12
TheAnalysis of the Cash Flow Statement 340 The Analysis of Growth and Sustainable
Earnings 392
The Analyst's Checklist 341
The Calculation of Free Cash Flow 341 The Analyst's Checklist 393
GAAP Statement of Cash Flows and Reformulated What Is Growth? 393
Cash Flow Statements 343 Cutting to the Core: Sustainable Earnings 394
Reclassifying Cash Transactions 344 Core Operating Income 395
Tying It Together 349 Issues in Identifying Core Operating
Cash Flow from Operations 350 Income 398
XX Contents
Other Core Income Timing 631 Relative Value Analysis: Evaluating Firms within
Unusual Income Timing 631 Risk Classes 683
Organizational Manipulation: Off-Balance- Conservative and Optimistic Forecasting
Sheet Operations 631 and the Margin of Safety 685
Justifiable Manipulation? 632 Beware of Paying for Risky Growth 686
Disclosure Quality 632 Expected Returns in Uncertain Times 686
Quality Scoring 633 Summary 687
Abnormal Returns to Quality Analysis 635 The Web Connection 687
Summary 636 Key Concepts 687
The Web Connection 636 The Analyst's Toolkit 688
Key Concepts 636 Concept Questions 688
The Analyst's Toolkit 637 Exercises 689
Concept Questions 638
Exercises 639 Chapter 19
Minicases 648
The Analysis of Credit Risk
and Return 696
PART FIVE
The Analyst's Checklist 697
THE ANALYSIS OF RISK The Suppliers of Credit 697
AND RETURN 656 Financial Statement Analysis for Credit
Evaluation 698
Chapter 18 Reformulated Financial Statements 698
The Analysis of Equity Risk and Return 658 Short-Term Liquidity Ratios 700
Long-Term Solvency Ratios 702
The Analyst's Checklist 659
Operating Ratios 703
The Required Return and the Expected Return 659
Forecasting and Credit Analysis 703
The Nature of Risk 660
Prelude to Forecasting: The Interpretive
The Distribution of Returns 660
Background 703
Diversification and Risk 664
Ratio Analysis and Credit-Scoring 704
Asset Pricing Models 665
Full-Information Forecasting 708
Fundamental Risk 667
Required Return, Expected Return, and Active
Return on Common Equity Risk 669
Debt Investing 711
Growth Risk 670
Liquidity Planning and Financial
Value-at-Risk Profiling 670
Strategy 712
Adaptation Options and Growth
The Web Connection 713
Options 675
Summary 713
Strategy and Risk 676
.Key Concepts 713
Discounting for Risk 676
The Analyst's Toolkit 714
Fundamental Betas 677
Concept Questions 714
Price Risk 678
Exercises 715
Market Inefficiency Risk 678
Minicase 719
Liquidity Risk 681
Inferring Expected Returns from Market Prices 681
Finessing the Required Return Problem 683,. Appendix
Evaluating Implied Expected Return's with A Summary of Formulas 723
Value-at-Risk Profiles 683
Enhanced Screening and Pairs Trading 683 Index 740