 | Full-Information Forecasting, Valuation, and Business Strategy Analysis
After reading this chapter you should understand:
- How forecasting is a matter of financial statement
analysis for the future.
- How financial statement drivers translate economic
factors into a valuation.
- How to identify key drivers.
- How to conduct full-information pro forma analysis.
- The 15 steps in pro forma analysis.
- The seven steps involved in forecasting residual operating
income and abnormal operating income growth.
- How mergers and acquisitions are evaluated.
- How pro forma analysis is used as a tool in strategy analysis.
After reading this chapter you should be able to:
- Develop pro forma income statements and balance
sheets for the future.
- Make forecasts of future residual operating income,
abnormal operating income growth, and free cash flow
from pro forma financial statements.
- Make valuations from pro forma financial statements.
- Show how changes in forecasts for specific drivers
change pro forma financial statements and valuations.
- Use pro forma analysis for sensitivity analysis.
- Calculate the effect of a proposed merger or acquisition
on per-share value.
- Use pro forma analysis to evaluate strategy scenarios.
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