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ArgonProconsulting
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Traditional Accounting and Financial Economics
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1.Established to report historic events to non-manager shareholders
2.Rule-Based frameworks set by various national and international groups
3.No measure of risk
AccountingModel
1.Product of research into investment analysis and investor expectations of future returns
2.Economic theory basis –rules based on markets not committees -transcends national boundaries
3.Risk is integral to the model
Economic Model
Financial Analysis Models
• Framework for Decision Making and Communications
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• As managers, investors and academics realised the weaknesses of the accounting model and improved understanding of the economic model, many sought to create a hybrid model(s).
• Reported Profit & Loss• Balance Sheet• Past Orientation• Depreciation• Amortization• Intangibles• Goodwill• Ratios, ROCE
AccountingModel
• Forecasted Cash Flows
• Future Orientation
• Risk Estimation
Economic Model
• EVA• Market to Book• P/E
Hybrids
• Combining different models (in hybrids) will generate problems… Apples and Oranges…
Hybrids…
@TimoNurminiemi
http://www.linkedin.com/in/timonurminiemi
ArgonProconsulting
training
@TimoNurminiemi
http://www.linkedin.com/in/timonurminiemi
@TimoNurminiemi
http://www.linkedin.com/in/timonurminiemi
e-mail: [email protected]
