Question

Obtain an annual report for a large corporation and perform a quality earnings assessment.

Answer 1

A very important aspect of any valuation process of assessing quality earnings of a company is the ability to understand and interpret the financial statement of the company which on accurate basis will say the value of a company. In this process the analyser also predicts the future earnings of the company which is the key component of valuation.There are some qualities that an evaluator takes into consideration when the valuation of quality earnings is done .A few are

1.Receivables can be based on an increase in sales or acceleration of future sales.If a company's revenue is on the graph of growth then receivables are considered to be considered as positive. The company could accelerate future by offering incentives and discounts to customers of early purchases are made.

2.Inventories -Increase in inventories show that there is an increase in sales.Keeping stock of products should be careful because if it is perishable products then it is going to cost a lot in inventories.

3.Assets in the form of company manufacturing plants equipments and company's property are also valuable assessment of a company.Recent expenditures in purchase of equipments or any kind of growth shows that the company is moving forward.

4.Revenues in various forms are to be checked completely.Accelerated revenues show the real status of an organization. Analysing of what the actual revenues are and how it differs from recorded revenue makes it a vast difference.Policies regarding revenue and finance play a major part in assessing a financial statement.

5.Asset sales-Some organizations gain revenue through selling some of their assets and investing them in company's financial terms.

These are some of the factors which an analyser considers when performing a quality earnings assessment. There are some other options like tax options,stock options, research and development expenses and intangible assets.All these assets when thoroughly analysed gives the exact valuation of a company.