Discussion of “Back to Basics: Forecasting the Revenues of Internet Firms” and “A Rude Awakening: Internet Shakeout in 2000”

Discussion of “Back to Basics: Forecasting the Revenues of Internet Firms” and “A Rude... Review of Accounting Studies, 6, 361–364, 2001 C 2001 Kluwer Academic Publishers. Manufactured in The Netherlands. Discussion of “Back to Basics: Forecasting the Revenues of Internet Firms” and “A Rude Awakening: Internet Shakeout in 2000” STEPHEN H. PENMAN shp38@columbia.edu Graduate School of Business, Columbia University, 612 Unis Hall, 3022 Broadway, NY 10027 1. Introduction For the purpose of firm valuation, analysis of financial statements is typically more infor- mative for seasoned firms. Equity value is based on the earnings or cash flows that are expected in the future and, for seasoned firms, the current financial statements are more likely to be an indication of the future “steady state.” So, if one forecasts that current profit margins and turnovers are a good indicator of future margins and turnovers, one gets a good indication of firm value simply by adding a forecast of sales growth to the financial statement information. The Coca Cola Company, for example, is relatively easy to value because it has fairly constant margins and turnovers, so the analyst focuses on the sales growth rate. The financial statements enhance the valuation even though Coke’s important brand asset is missing from the balance sheet. Despite the poor balance sheet, http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “Back to Basics: Forecasting the Revenues of Internet Firms” and “A Rude Awakening: Internet Shakeout in 2000”

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1011627311960
Publisher site
See Article on Publisher Site

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