Abnormal Earnings Valuation Model
- A method for determining a company's worth that is based on book value and earnings. Also known as the residual income model, it looks at whether management's decisions cause a company to perform better or worse than anticipated. The model says that investors should pay more than book value if earnings are higher than expected and less than book value if earnings are lower than expected
There are numerous other methods for valuing companies, including P/E ratio, price-to-book value ratio, return on equity, return on capital employed and discounted cash flow. Investors and analysts should not place too much emphasis on any one of these (or a number of other) measures of value because no single method can provide a complete picture of a company's financial performance.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Net operating assets — (NOA) are a businesses operating assets minus its operating liabilities. NOA is calculated by reformatting the balance sheet so that operating activities are separated from financing activities. This is done so that the operating performance of… … Wikipedia
Clean surplus accounting — method provides elements of a forecasting model that gives price as a function of earnings, expected returns, and change in book value. Clean surplus accounting is calculated by not including transactions with shareholders (such as… … Wikipedia
Efficient-market hypothesis — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond … Wikipedia
Nobel Prizes — ▪ 2009 Introduction Prize for Peace The 2008 Nobel Prize for Peace was awarded to Martti Ahtisaari, former president (1994–2000) of Finland, for his work over more than 30 years in settling international disputes, many involving ethnic,… … Universalium
Stocks for the Long Run — Infobox Book name = Stocks for the Long Run title orig = translator = image caption = author = Jeremy J. Siegel illustrator = cover artist = country = language = series = subject = genre = publisher = McGraw Hill pub date = 1994 english pub date … Wikipedia
Income statement — Accountancy Key concepts Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management · Chart of accounts … Wikipedia