Asked by Waldie Alameda on Jul 15, 2024
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Describe the role of accounting numbers in corporate valuation.
Corporate Valuation
The process of determining the overall value of a business entity considering its assets, earnings, market position, and potential for future earnings.
Accounting Numbers
Quantitative financial data reported in the financial statements of a company, representing its economic activities.
- Acknowledge the role of accounting numbers in corporate valuation and the calculation of key financial metrics.
Verified Answer
JT
Julie ThachJul 15, 2024
Final Answer :
Corporate valuation involves estimating the worth or price of a company,one of its operating units,or its ownership shares.Some equity valuation approaches are based on discounting a firm's future earnings or free cash flows.In such settings,the role of accounting numbers (i.e.,the information in financial statements)is to aid in the development of projections of the firm's future earnings and cash flows.These projections are then discounted at the firm's risk-adjusted cost of equity capital to arrive at an estimate of the equity's value.
Learning Objectives
- Acknowledge the role of accounting numbers in corporate valuation and the calculation of key financial metrics.
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