FINC3015 Lecture Notes - Lecture 1: Real Options Valuation, Deferral, Deferred Tax
30 Jul 2018
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Document Summary
Valuation analysis: tries to make sense out of uncertainty, never know true value but process of gathering information for valuation contributes to better decision-making. Applications of valuation: stock selection, evaluating corporate events, rendering fairness opinions, evaluating business strategies and models, communicating with analysts and shareholders, appraising private business. Inferring market expectations: price movements are always based on market expectations, can therefore infer market expectations about future company performance. Recognising revenue early, e. g. bill-and-hold sales, recording sales of equipment or software prior to installation and acceptance by customer. Potentially poor underlying performance masked, reported income , future income . Classification of non-operating income or gains as part of operations. May be non-recurring and may not relate to true operating performance, thereby masking declines in actual operating performance. Recognising too much / little reserves in the current year, e. g. restructuring reserves, loan-loss or bad-debt reserves, valuation allowances against deferred tax assets.
