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”

Loading next page...
 
/lp/springer_journal/discussion-of-back-to-basics-forecasting-the-revenues-of-internet-MnBdjSXNLk
Publisher
Springer Journals
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

Abstract

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,

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 3, 2004

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off